Eurozone PMI increases to 7-month high in August, no sign of much Brexit impact yet - ING

Bert Colijn, Senior Economist at ING, notes that the composite PMI for the Eurozone has increased from 53.2 to 53.3 in August and this marginal improvement shows that the economic environment seems to remain steady and is indicating moderate growth.

Key Quotes

“The manufacturing sector saw a slight decrease in the indicator, from 52 to 51.8, with order books declining somewhat. This might mean bad news for output growth in the months ahead and could partly be due to the uncertain post-Brexit economic environment that the Eurozone is currently in.

The service sector still saw growth improve somewhat, but optimism among purchasing managers decreased somewhat. As consumer confidence has come down sharply in July, it could be that this is working its way through to stores now. While that could be the case, domestic conditions do seem to remain quite strong in the Eurozone for the moment, which supports domestic demand in the short term. This is helped by continued job growth, although the pace of hiring slowed in August as hiring growth in manufacturing and services became more muted in the wake of the Brexit-vote in the UK.

With selling prices decreasing at a faster pace in August than in July, it seems that the recent weak improvements in inflation are mainly oil price driven and that core inflation could remain weak for a while to come. Overall, the economic environment remains subdued in the Eurozone and while output growth seems to have held up in the first weeks after the Brexit-vote, there are signs that the significant economic uncertainty the vote brings will weaken Eurozone growth in the second half of the year as well.”