Euro-zone factories accelerated while consumers still expected contraction
August's flash PMI rose on manufacturing and new orders; ECB consumers lowered inflation expectations but still expected the economy to contract over the coming year.
Economics & Markets··Evening
New orders lifted factories to a four-year high
The S&P Global flash composite output index for the euro zone rose to 52.1 in August from 52 in July, reaching its highest level since November. New orders grew at their fastest pace in 40 months. Manufacturing climbed from 51.9 to 52.8, a high of more than four years, while services held at 51.7. Export orders increased for the first time since February 2022, and employment across the bloc grew for the first time this year as manufacturers resumed hiring.[1]
Germany expanded as French services contracted
The regional average conceals a national split. A factory upturn offset a sharper services decline in Germany, leaving total activity modestly higher. France contracted more than expected as heatwaves hit its services-heavy economy. Price measures were calmer: input-cost growth slowed to a six-month low and output-price inflation reached a five-month low. ING's Bert Colijn described the economy as resilient so far, while warning that oil above 90 dollars a barrel and interest rates repriced higher could slow growth in the months ahead.[1]
Inflation expectations eased while contraction remained expected
In the ECB's July consumer survey, median inflation expectations for the next 12 months fell from 3 per cent to 2.9 per cent, while the three-year measure eased from 2.8 per cent to 2.7 per cent. The five-year expectation stayed at 2.4 per cent. Consumers still expected the economy to contract by 1.2 per cent over the coming year, compared with 1.4 per cent in June. Expected unemployment remained at 11.2 per cent. The expected mortgage rate fell from 5 per cent to 4.9 per cent, and expected nominal income growth slipped from 1.1 per cent to 1 per cent. The survey covered about 19,000 consumers in 11 euro-area countries.[2]
