UK & Europe
EURBoth the German manufacturing and services PMIs registered small falls, but these falls were much smaller than had been expected after last week’s sharp fall in the German ZEW data. The details of the German PMIs continue to be decent but were mixed. In the manufacturing PMI, new orders grew at the slowest pace in a year, but the services PMI reported new orders at their strongest level for three years. Employment growth continues but continues to see a softer pace, and German businesses are still adding to backlogs and the pipeline of work.
The French PMIs were mixed but largely weak in the details, however, they do seem to offer some of the first glimmers of hope. New business in services increased for the first time since March at the fastest pace since August 2011, and as in Germany, manufacturing new orders were at their weakest since early-2013. In contrast to Germany, there was a sharp drawdown of backlogs, especially in manufacturing, but with persistent weak demand and new orders, there is a worry that the backlogs will prove insufficient to sustain businesses and we’ll continue to see the job cuts quicken, as we are close to the fastest pace of jobs cuts currently. We continue to see signs here of very weak prices to try and compensate for the lack of demand as well. So we have some strength coming into service sector new orders, but it’s hard to expect that is sustained.
The pan-Eurozone PMIs both slightly missed consensus expectations and suggest some weakness in peripherals in August. Overall, today’s PMIs continue to suggest that global manufacturing is struggling but the core of German growth remains strong, and very unusually is being driven by services.