- Prior 50.9
- Composite PMI 46.7 vs 47.0 prelim
- Prior 48.6
The headline reading is a 30-month low while the composite reading is a 33-month low. That puts into perspective the kind of downturn and economic contraction we're seeing in Europe in Q3. Germany and France are the two major disappointments and that hurts even more considering their stature. HCOB notes that:
“The eurozone didn't slip into recession in the first part of the year, but the second half will present a greater challenge. For, the once stabilizing services sector turned into a drag for the economy while manufacturing has not bottomed out yet, most probably. The disappointing numbers contributed to a downward revision of our GDP nowcast which stands now at -0.1% for the third quarter.
“Input price increases surprisingly picked up putting the perspective of rapidly decreasing inflation into question. The prime suspect is likely the wage hikes, which are not necessarily in sync with the business cycle, given their often longer term nature.
“Employers weren't too keen on beefing up their teams. The way things have been going down lately, it's a sign they'll be moving towards job cuts sooner, not later. Still, the decline in unfinished tasks and new orders doesn't seem severe enough at this point to trigger aggressive cuts.
“Among the big eurozone countries, the main drag is coming from Germany and France, where activity in the service sector weakened at the fastest rate this year. In Italy and Spain, instead, there has been a relatively mild downturn in August. Judging by what occurred in Germany and France, it seems that Italy and Spain won't be able to dodge a more severe services sector downturn, though.”
