- Prior 47.9
- Manufacturing PMI 43.4 vs 44.0 expected
- Prior 43.5
- Composite PMI 47.1 vs 46.5 expected
- Prior 46.7
Overall activity remains in contraction at the end of Q3 but at least it is some improvement to August. Demand conditions remain very weak however, with new orders experiencing its sharpest drop in almost three years. But the good news at least is that inflation pressures are also continuing to ease, so that will be helpful for the ECB. HCOB notes that:
“The numbers for PMI services in the Eurozone paint a grim picture, but it’s not all doom and gloom. Sure, activity has been
reduced once again and new incoming business has been shrinking for three months in a row. However, companies are
hiring in September at a somewhat faster pace than they did in August. Thus, companies still show some resilience and
optimism in the face of lower demand. Having said this, we expect the eurozone to enter a contraction in the third quarter.
Our nowcast, which incorporates the PMI indices, points to a drop of 0.4% compared to the second quarter.
“The Eurozone’s HCOB PMI figures for services are serving up a bitter pill for the European Central Bank to swallow. The
input prices, where wages play an important role, have sped up in September for the second month in a row. Output prices
continue to be on the increase as well, but upward pressure has softened a bit again. While the latter may bring some
comfort to central bankers, the heat on input prices shows that the risk of a wage-price spiral must remain very much on the
radar of the ECB.
“The main drag continues to come from manufacturing where the order situation deteriorated further. Companies keep
reducing the stock of purchased goods. However, the declines in purchasing activity have lost some momentum. Thus, the
destocking process may bottom out over the next few months in line with a worldwide trend. This will be an important
precondition for the recovery of the manufacturing sector which we expect for the beginning of next year.
“In terms of the weakness in the manufacturing sector, France is catching up with Germany. Indeed, the French PMI heads
further south while Germany’s PMI has marginally increased from a very low level. In the services sector, the French
services sector is in a much worse state than the German one. At the same time there are signs of a stabilization in
Germany services, but further deterioration in France. This may have to do with the fact the luxury goods business and
services play a more important role in France than they do in Germany. When things go south, those are the first to feel it,
way more than non-luxury business providers.”