Sentiment among service companies in the euro zone is comparatively upbeat in September while in industry the mood is clouding over. With production figures weak and export order growth more or less grinding to a halt, the prospects do not look good. The average survey results for the third quarter have reached their lowest level since the end of 2016. Based on the purchasing managers’ survey, economic growth in the euro zone is unlikely to match that of the second quarter. A similar conclusion can also be drawn from the EU Commission’s survey on business confidence.
According to preliminary figures, the composite index for the euro zone fell from 54.5 to 54.2 index points in September. This is due to a slight improvement in the assessment of service companies while industry recorded a noticeable decline in sentiment. According to the purchasing managers surveyed, this was attributable to an almost negligible rise in order intake and above all to a stagnation in export orders. Inventories of unprocessed orders have also fallen for the first time since April 2015. At national level, the survey results were somewhat better in Germany than in France. According to IHS Markit, sentiment in the rest of the currency area recovered only slightly from the 22-month low of the previous month.
Sentiment among the German purchasing managers was mixed in August. A sizeable improvement in the service sector failed to fully compensate for a much more sceptical assessment in industry. The composite index dropped 0.3 points compared with the previous month and now lies at 55.3 points. According to the purchasing managers surveyed, incoming orders in industry recorded hardly any increase, with the increase rate in production the lowest since April 2016. On the other hand, the surveyed service companies are reporting robust new business and increasing employment intentions. In view of the high geopolitical uncertainties, sentiment in German industry continues to deteriorate. These results of the purchasing manager survey suggest that there was hardly any acceleration in economic growth in Germany in the third quarter.
In France, sentiment in the private sector has appreciably weakened. The broad-based composite purchasing managers’ index stood at 53.6 points in September, 1.3 index points below the previous month’s level. This is the lowest level in 21 months. While the growth rates for new business in the services sector were the weakest in nearly two years, the purchasing managers in industry reported only a marginal increase in production, with demand from the automotive sector most likely the main reason for this. New orders for exports also fell. Nevertheless, business expectations have brightened and employment intentions have remained robust. The decline in the composite index does not forebode well for economic growth in the third quarter. On quarterly average terms, the index has fallen for the third time in succession. According to the purchasing managers’ indices, there is currently no sign of a recovery in growth following the weak preceding quarters that were burdened by the railway strike.