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EMU CommentPMI suggests fairly stable Q3 growth

  1. Stable PMI in Q3
  2. Manufacturing slow-down continues
  3. The ECB concerns gained some support
Stable PMI in Q3
The flash composite PMI index decreased to 54.2 in September from 54.5 in August. This was marginally weaker than expectations. As a result, the index is still relatively stable and indicates – per se - that GDP growth in Q3 will probably not fare much better than the somewhat disappointing slow-moving H1 of 2018, although the PMI level continues to point to slightly higher growth (first graph).
Manufacturing slow-down continues
Weakness’ was again especially visible within eurozone manufacturing, where the PMI fell to 53.3 in September from previously 54.6. This was a two-year low (second graph). Hence, the earlier stronger EUR combined with recent trade jitters seems to continue to weigh on the sentiment here. We do however expect to see some stabilization ahead as the currency effect wanes, and as global PMI’s has seen a more stable development in recent months. The eurozone Service PMI climbed marginally (to 54.7) for a second month, but overall has been flattish over the past seven months. It’s positive that the waning consumer confidence and weaker stock markets and the disappointing summer retail sales haven’t harmed the service sector optimism more clearly.
The ECB concerns gained some support
Overall, today’s PMI contains little news for the ECB, but the apparent strains within manufacturing is a source of concern as also expressed by the ECB on the recent policy meeting. Here GDP growth was revised down a notch due to slowing global demand and risks was noted as having gained more “prominence”. While the Composite employment index kept positive levels in September, the service PMI output index fell for a third month, suggesting that the build-up in core inflation is still slow (third graph).


Source: Macrobond

 


Source: Macrobond

 


Source: Macrobond

Disclaimer

Rasmus Gudum-Sessingø

Senior Economist

Eurozone

ragu02@handelsbanken.dk

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