Purchasing managers‘ indices in the euro zone: further burden from division between industry and service providers

The still gloomy mood in European industry continues to weigh on economic activity in the euro zone. The overall index improved slightly from 51.5 to 51.8 points. Despite a small improvement, the index for the manufacturing sector remained well below the neutral mark of 50 at 47.0 points. The barometer for the services sector, at 53.4 points, was comfortably higher. The robust development of service providers has so far prevented the pronounced weakness in industry from dragging the economy of the euro zone into the depths. And there are hardly any signs of an end to the industrial downturn, because orders, employment intentions and prospects are assessed very negatively by purchasing managers. France is an exception.

There, the comprehensive composite index improved from 51.9 to 52.7 points in August. Overall, the mood in the French private sector is thus strengthening. At sector level, both the index for service providers and the index for the manufacturing sector showed slight improvements. The index for the manufacturing sector even jumped above the 50 mark again. In contrast to the rest of the euro zone, incoming orders contributed to the brightening of the situation, increasing significantly in the service sector, while a small increase was recorded in industry. The improvement in orders also ensured that the purchasing managers surveyed reported increasing employment intentions and were comparatively optimistic about the coming months. Overall, the purchasing managers‘ indices signal that moderate economic growth in France is likely to continue in the third quarter.

The mood among German purchasing managers in the manufacturing sector in August is still not a sign of a sense of optimism. The corresponding figure improved slightly, but at 43.6 points it remains clearly in the shrinking range. The sentiment barometer for service providers fell only slightly. The comprehensive composite index improved by 0.5 points to 51.4 points in August. Industry is still suffering from very low demand. According to IHS Markit, the declines here were more pronounced than at any time since 2013. In particular, orders from abroad are missing. Overall, this puts pressure on the business prospects, which are estimated to be as low as they were last in November 2012. No wonder that the employment intentions are weaker. The weakness of the industry also appears to be slowly having an impact on the services sector.

 

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