In August, the euro zone PMI business confidence indicators continued to show a mixed picture. According to the first estimate, the euro zone manufacturing PMI increased for the first time in six months. The headline index rose from 44.0 to 45.3, while the consensus was looking for only a marginal increase (to 44.2). The euro zone manufacturing sector remains in steep contraction, but the pace of decline eased to the slowest rate in four months.
National data show that both in Germany (45.1 from 43.0) and France (46.2 from 43.7) the manufacturing PMI’s increased in August. The details show that both output and new orders picked slightly up, although from low levels and also employment contracted at a slower rate. Euro zone services PMI, on the contrary, dropped again in August after two consecutive monthly increases.
The preliminary estimate showed a decline from 47.9 to 47.5, while a more limited drop (to 47.7) was expected. After sentiment in the sector did not weaken further in the previous months, confidence took again a change for the worse. National data show that the services PMI weakened sharply in Germany (48.3 from 50.3), reaching its lowest level in more than three years. French services PMI, on the contrary, improved for a third straight month (50.2 from 50.0). The overall euro zone composite PMI increased from 46.5 to 46.6, a third straight increase. A third consecutive increase is often marked as a change in the trend, but we would be very cautious this time as the index has improved only marginally and the situation remains extremely fragile and subject to lots of event risk in the euro area.