Eurozone – Will manufacturing sentiment decline further in September?
|Eurozone – Manufacturing sentiment should slightly improve in September
Next week (September 21), a flash estimate of the manufacturing sentiment of the Eurozone, Germany and France will be published for September. The sentiment slightly declined in August, due to the worsening of the trade conflict and the flaring up of the Turkey crisis. In particular, the receipt of new orders developed weakly in August. Generally, concerns about tariffs and world trade weigh on the outlook. Among the major countries of the Eurozone, the sentiment in Italy was particularly weak, as subdued domestic demand exerts additional pressure. The uncertainty caused by the government obviously weighs on the outlook.
As there were no new trouble spots to add to the previously known ones (the US trade conflict with the rest of the world, Italy’s populist government, US sanctions against various countries), we expect a small rise in the manufacturing sentiment of the Eurozone in September. On the country level, growth of the Eurozone will be driven primarily by Germany and Spain, as well as small and very competitive countries like the Netherlands, Ireland and Austria, according to our assessment. We expect a slight growth acceleration in France’s third quarter, after the dampening impact of strikes gradually abates. Italy’s economy currently suffers from the uncertainty caused by the new government. In the long run, substantial structural deficits (especially market efficiency as well as R&D) weigh on Italy’s growth prospects. Unfortunately, there is currently no political will visible in Italy to actually resolve these deficits. Therefore, our expectations about Italy’s below-average growth rates compared to the Euro Area remain unchanged. Based on underlying indicators, we expect stable GDP growth in 3Q18 for the Eurozone at about +0.4% q/q.
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