Euro area PMIs diminish hopes for swift recovery – Commerzbank

The Purchasing Managers' Index for the manufacturing and services sectors, the most reliable economic barometer for the euro area, fell for the second month in a row in July (from 50.9 to 50.1). This dampens hopes of a swift recovery in the euro area. This recovery is likely to start later and be weaker than many forecasts expect. This applies in particular to Germany, where the PMIs once again fell more sharply than the euro area average, Commerzbank economist Vincent Stamer notes.

Euro area PMIs dampen hopes of a recovery in the euro area

“The composite Purchasing Managers' Index eurozone fell for the second time in a row in July. The index fell from 50.9 to 50.1 (Table 1), disappointing expectations. The economists surveyed in advance had expected a stagnation. The unexpected setback in the previous month was therefore not a downward outlier.”

“Although the index is still just within the range in which the economy has grown in the past, the upward trend that has been in place since last year, has come to an end for the time being. The decline was particularly sharp in Germany. Here, the mood in both the manufacturing sector (from 43.5 to 42.6) and the service sector (from 53.1 to 52.0) deteriorated significantly.”

“Today's weak figures put a question mark over a noticeable economic recovery expected by many forecasters for the second half of the year. The only positive news comes from the sub-category of the sales prices for services. Both the weak momentum in the sentiment indicators and the assessment of service prices are likely to encourage the ECB to cut key interest rates again in September.”