August – PMIs: Eurozone poll data weakens further

In France, the divergent development between the industry (poll data weakened further) and service sectors (rising poll data) continued in August, according to the most recent PMI data. The average reading for the months of July and August thus far point to an ongoing stagnation of the French economy in 3Q14. The August PMI data for Germany has declined sharply for industry and modestly for the service sector. On average, the survey data for the months July and August indicate modest growth for Germany’s economy in 3Q14.

For the entire Eurozone, the PMI data for August weakened for the industry and service sectors. The survey data for industry is now only slightly above the growth threshold level. The average PMI data for July and August indicate modest growth, at best, for the Eurozone in 3Q14. The prolonged weakness of industry is worrisome for the Eurozone, given the fact that, in 2Q14, the service sector was not able to compensate for the declining dynamics of industry. Currently, weakening leading export indicators (e.g. Ifo export expectations), which reflect the consequences of the Ukraine crisis to a certain extent, point to ongoing weakness of Eurozone industry in 3Q14. This implies certain downward risks for the Eurozone economy in 3Q14. On September 5 and 10, data for July industry production from Germany and France will show whether the current weak poll data is confirmed or not.

Globally, industry sentiment is currently developing in a mixed manner. For China, the industry PMI data for August declined slightly and is now again close to the growth threshold level of 50. In the US, however, the industry poll data for July from the ISM institute rose to a very high level of 57.1, indicating sound growth momentum for the US industry.