Purchasing managers in the Eurozone: service sector more optimistic – industry showing signs of weakness

The decline charted by the purchasing managers’ indices (PMI) in the Eurozone did not continue in August according to the preliminary survey findings. This is, however, mostly the case for the service providers. The corresponding sentiment barometer improved to a 2-month high. In manufacturing industry the sub-index fell again. According to information provided by Markit, export orders increased less than at any time in the past two years and output hardly budged. Overall, business expectations declined in both sectors.

The Eurozone Composite Index edged up almost imperceptibly from 54.3 to 54.4 index points. The purchasing managers’ indices for June also remained above the growth threshold of 50 index points. So in the middle of the third quarter the purchasing managers’ indices are admittedly above the growth threshold of 50 points, but despite the slight improvement in August the quarterly growth rate will probably hardly outstrip the 0.4 per cent recorded in the previous quarter.

The German purchasing managers also made a patchy showing in June. While sentiment in manufacturing industry deteriorated, sentiment among the service providers improved significantly. According to the survey findings the service companies reported higher incoming orders and improved hiring intentions. In manufacturing industry, production marked time. The manufacturing sector also reported weaker export order growth and slower job creation. Nevertheless, price pressure increased on the purchasing and sales side. The increased confidence among the service companies lifted the Composite Index by 0.7 ticks to 55.7 index points, which was a six-month high.

In France the decline charted by the purchasing managers’ indices since the beginning of the year seems to have touched bottom. In the August survey the purchasing managers said they were more optimistic again. In the service sector there were reports of increasing business activity. Manufacturing industry reported increasing production and besides robust domestic demand reported that export orders are also rising at least weakly again. In both sub-sectors hiring intentions also increased. But the price pressure also increased on the purchasing side. However, it was possible to pass part of this on to customers. Both sentiment barometers improved month-on-month. Overall, the improvement allowed the French Composite Index to climb by 0.7 points to 55.1 points. But the fly in the ointment is the fact that business expectations fell to the lowest level since November 2016. The economic climate published today by the French statistics office INSEE also continued its decline.


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