Manufacturing activity in Europe shrank for the first time in two years. The Markit Manufacturing PMI for the Eurozone declined to 49.7 in August from 50.4 the previous month, while the service sector PMI fell declined 0.1%, falling to 51.5 in August from 51.6 in July.
Here’s the scoreboard:
- French August services PMI climbed to 56.1, up from 54.2 in July beating estimates, but manufacturing PMI came in at 49.3, down from 50.5 the previous month, and weaker than median forecast of 49.7.
- German manufacturing PMI for August held steady at 52, but beat median forecast of 50.8. The country’s services PMI however fell to 50.4, down from 52.9 in July.
Germany has posted slower output growth for seven straight months. Combine this with weak investor sentiment, and it is a troubling sign for the debt-ridden Eurozone which looks to Germany at the strong arm of the region. Tim Moore, senior economist at Markit said:
“August’s flash PMI data points to only marginal growth in Germany’s private sector, while the near-term outlook turned more negative amid a fall in new work intakes for the first time in around two years. This suggests an elevated risk that Germany is on course to repeat the anemic economic growth shown by its disappointing second-quarter GDP figures.”
Germany’s composite output index, which is an average of the manufacturing and services indices, came in at 51.3 in August, a 25-month low. Here is a chart that shows a historical overview of the composite output index and German GDP growth:
[credit provider=”Markit Economics”]