2 Charts That Have Economists Feeling Optimistic About Europe Again


Europe’s new purchasing managers index (PMI) figures paint a rosier picture of the beleaguered continent’s economy.

With French manufacturing output reaching a two year high and German Flash PMI beating expectations, business confidence in Europe is on the rise.

From new analysis from Societe Generale:

All in all, the PMIs developments since April have been impressive in the euro area. The PMI composite of the euro area has increased from 46.9 in April to 48.7 in June and 50.4 in July. In July, the manufacturing index rose to 50.1 from 48.1 while the services index increased to 49.6 from 48.3 It seems that PMIs indexes were too low during the spring when compared to hard data and that business sentiment has been catching up for the last three months.

pmi socgen

Credit conditions are another story though, with banks continuing to tighten.

“Although details are not available for each country yet, this survey suggests that financial fragmentation remains a major headwind for the region as a whole, and prevents the monetary conditions set by the ECB to pass through the real economy,” according to the report.

But the rate of tightening is slowing.  And this is reason to be optimistic.

“In prior surveys, banks had remained cautious, mainly as they were still concerned about the economy and loan losses,” said JPMorgan’s Greg Fuzesi.

“Economic data suggest that the Euro area economy is finally emerging from recession.”

credit standards ECB

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