Focus: Eurozone manufacturing sentiment

Tailwind for Eurozone industry?

Next week (September 23), a first flash estimate of the manufacturing sentiment of the Eurozone, Germany and France for September will be released. In August, Eurozone manufacturing sentiment brightened slightly for the first time in a long while, but remained at very low levels. Data on industrial production in July confirmed the weak sentiment with a further drop of 0.4% from the previous month. European industry continues to suffer from the global trade conflict, the threat of a hard Brexit and structural problems in the automotive industry.

On the other hand, the last few weeks have seen a slight easing in the key political hotspots. The UK parliament passed a law that bans a no-deal Brexit (a hard Brexit can nevertheless not be ruled out), and there has been a slight rapprochement in the trade dispute between the US and China.

If this positive development continues in the coming weeks, we believe that the manufacturing sentiment in the Eurozone should also benefit from this further. After the sharp downturn of the last 12 months, industrial activity thus appears to be bottoming out. Nevertheless, we do not expect a rapid turnaround in the economy, since the growth outlook for emerging markets remains subdued, which means that we continue to expect weak growth momentum in Eurozone exports. Thanks to a robust domestic economy, we nevertheless expect stable growth momentum in Eurozone GDP of around +0.2% to +0.3% q/q in 3Q19.

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