Eurozone Witnesses Sluggish Economic Growth in August: PMI Data

Eurozone economy continued to grow in August 2018 albeit with the rate of expansion remaining one of the weakest seen over the past year-and-a-half.

Companies’ expectations of future growth meanwhile slipped to the lowest for nearly two years, said IHS Markit Eurozone Composite Purchasing Managers Index (PMI) in its latest data released on Thursday (23).

The IHS Markit Eurozone Composite PMI edged higher from 54.3 in July to 54.4 in August, according to the flash reading. The rise signalled a marginal acceleration of output growth during the month. However, the increase in output was the third-weakest since January 2017 and markedly lower than the expansions seen earlier in the year.

Although growth rates improved slightly in manufacturing and services, both remained among the weakest seen for at least one-and-a-half years. Similarly, new order growth picked up marginally in both sectors but, measured overall, was nevertheless the third-weakest since December 2016.

Meanwhile, Eurozone employment growth hit a six-month high, once again running close to survey record rates. However, while service sector jobs growth struck the highest since October 2007, factory payroll growth slipped to a 17-month low.

Future expectations of business activity meanwhile deteriorated to a 23-month low, slumping to a 34-month low in manufacturing and a 21-month low in the service sector. Optimism was subdued by recent signs of cooling demand, higher prices, and rising political concerns.

The flash surveys also found price pressures to have remained elevated as higher wages were seen in some countries, alongside increased fuel, transport and commodity prices. However, although input cost and selling price inflation rates remained among the highest seen over the past seven years, both cooled to three-month lows.

Output price inflation eased in both manufacturing and services. Within the eurozone, growth accelerated in France and Germany but slowed across the rest of the single-currency area.

The rate of growth of Germany’s private sector economy accelerated to the fastest since February, suggesting the third quarter will see growth accelerate from the second quarter. Employment growth held close to record highs in Germany, but slower backlog accumulation hints at the pace of job creation cooling in coming months.

France also saw growth perk up, hitting a four-month high as the pace of expansion lifted higher in both manufacturing and services.

Elsewhere in the Eurozone, output and new order growth rates weakened to 22-month lows, with future expectations hitting a five-year low.