The Brexit effect does not sink the real economy of the euro area, which continued to progress at a constant pace in August. According to the latest flash estimates from Markit, the composite PMI index stood at 53,3 points, up fractionally from 53,2 in July, remaining above 50 (which marks the boundary between expansion and contraction) and even recording a record value in the last seven months.
Given the index value only marginally higher than the 2016 average, Markit notes, the growth forecast for the third quarter promises to be similar to that recorded in the first half of the year. The PMI manufacturing, however, fell to 51,8 from 52 in July, to a three-month low, while the services it rose to 53,1 (52,9 in July), a 3-month high.
However, the situation could worsen in the immediate future. Indeed, Markit notes that the slowdown in the growth of incoming orders in the manufacturing sector and the decline in optimism in the services sector have weakened the employment rate, which suggests a slowdown in growth in the coming months. Meanwhile, inflationary pressures have maintained a subdued pace.
The August survey showed a marginal acceleration in the production both in manufacturing and in the tertiary sector. However, the greatest variation was observed in incoming orders, with a slowdown in question in manufacturing. If the influx of new orders in the services sector has increased at the fastest rate in the last four months, incoming manufacturing orders recorded the slowest rate of growth in the last 18 months. To address falling demand, the manufacturing sector reduced inventories, with inventories of finished goods in warehouses posting the fastest rate of decline in six years.
As for individual countries, Markit reports that France scored its best quarter of the year, posting the highest rate of growth since last October. However, in terms of overall growth, France continued to lag Germany, although the latter's expansion faltered from the seven-month high recorded in July. In this still ongoing third quarter, German growth is measuring slightly higher values than in the first half of the year, acting as the driving force behind the general expansion of the Eurozone. Excluding Germany and France, the rest of the area recorded further strong general growth in August, albeit at one of the weakest growth rates recorded in the last 18 months.
In detail, manufacturing remains weak Germany, at its lows in two-three months and the services sector recorded the weakest growth in 15 months. The flash estimate of the composite index measured by MarkitEconomics shows a value for Germany, in August, down to 54,4 points from 55,3 in July. The PMI manufacturing index fell to 53,6 from 53,8, the lowest in three months. The services index slipped to 53,3 from 54,4 in July. The data is in line with market expectations.
as to France, the services sector recorded the highest growth in 10 months in August and dragged the composite PMI upwards, which rose to 51,6 from 50,1 in July. The data measured by MarkitEconomics show, in fact, a leap in the services index to 52 (from 50,5 in July). The data show, however, still stability in manufacturing production with the relative PMI index falling to 48,5 in August from 48,6 in July.
