Eurozone PMI signals fragile third quarter expansion
Topics: EUROZONE PMI
With price pressures also remaining subdued, the data add to the case for more stimulus from the ECB in September.
At 51.9 in August, up from 51.5 in July, the IHS Markit Eurozone PMI Composite Output Index signalled the continued yet still modest expansion of the euro area private sector.
The average reading so far for the third quarter indicate that GDP will rise just 0.2%, assuming no substantial change in September.
Official data available so far for the quarter suggest growth could be even weaker.
The picture remained very mixed both by sector and country, highlighting how downside risks continued to persist.
The August data showed that a fierce manufacturing downturn, fuelled by deteriorating exports and most intensely felt in Germany, continued to be offset by resilient growth in the service sector, the latter in turn propped up to a large extent by solid consumer spending in domestic markets.
The big question is how long this divergence can extend before the manufacturing weakness spreads to services and households.
With jobs growth waning to the slowest since early-2016 a deteriorating labour market looks set to be a key transmission channel in which the trade-led downturn infects the wider economy.
A sharp drop in business optimism about the coming year in the service sector, down to the joint-lowest for six years, suggests that companies are already braced for tougher times ahead. ■