Euro area: August PMI gives mixed results but still positive

Euro Area F lash Composite PMI has continued to recover in August to 5 1.1 (1 2 -month high) from 50. 9 in Ju ly , above consensus expectations (49. 7), driven by an improvement in manufacturing ( +0. 7 point to 50.5 , 3 7 -month high) while the service index declined this month (-0,3pt to 50.7) Subcomponents are showing a mixed picture The breakdown of the index is mixed this month . Even though , composite new orders have improved again, at the same time , future output declined, and input prices increased. However, the good news this month is the manufacturing index which is still recovering from the low point reached in July 2023 on the back of the announcement of the new EU- US tariffs deal and the stronger euro since liberation day which could have harmed EU exports. Germany and France recorded an increase as well. The German composite flash estimate for August exceeded expectations, coming in at 50.9 after 50.6 in July. As for the Euro area , the breakdown of the subcomponents indicates that the figures are not as strong as they appear, with the rise primarily attributable to increases in input and output prices of +1.2 pt and +0.9 pt, respectively. Meanwhile, future output and new export orders have declined by 1.7 pt each. On the manufacturing side, the index recorded an increase of +1.1 pt, approaching the equilibrium threshold at 49.9, while the services index fell by 0.5 points, now standing at 50.1, The Fr ench PMI Flash Estimates for August reveal an upside surprise, the Flash Composite PMI Output Index rose to 49.8 in August, up from 48.6 in July, approaching the neutral level of 50.0. Additionally, the Services PMI Business Activity increased to 49.7, up from 48.5 in July, reaching a 12-month high. Meanwhile, the France Manufacturing PMI climbed to 49.9, up from 48.2, marking a 31-month high. The PMI survey detailed results present a mixed picture as well . While there are some positive developments in employment, expectations remain cautious. New orders continue to decline, and businesses report rising input costs. GDP growth would remain subdued in Q3 August ’s figures confirmed a slight improvement in the Euro Area economic activity. Even though new export orders registered a decline in August, domestic new orders are still robust . Our official forecast is more pessimistic than our PMI based model – we expect no growth in Q3 - that expects GDP growth around +0. 2 % in Q 3 . Thus , today's PMI results could indicate that the ECB is 'well positioned' to assess shocks and needs more information before acting.