Eurozone: slight deterioration in manufacturing sentiment in September

We maintain our cautious scenario for the eurozone, consisting of a modest growth in the second half and our GDP growth forecast of -0.5% for the whole year.

The eurozone flash manufacturing PMI decreased from 51.4 in August to 51.1 in September, a result that was against consensus expectations of 51.7. By contrast, the eurozone flash services PMI edged up by 1.4 points to 52.1 in September, above consensus expectations (51.0) and reached its highest level since June 2011. As a result, the composite PMI, which is the weighted average of both sectors, increased further into expansion territory from 51.5 in August to 52.1 in September, recording its sixth consecutive month of improvement.

Europe - PMI 24.09.2013-1

Manufacturing survey in line with hard data
The decrease in manufacturing PMI was broad-based with most components, except from employment, posting a monthly decrease. In particular, output and new orders decreased by 1.3 points, although both remain above the 50 threshold. It is worth noting that the fall in new orders was driven by weaker domestic market, as new export orders dropped by only 0.4 points. Overall, the fall in the manufacturing sector is consistent with the disappointing industrial production release in July.

Europe - PMI 24.09.2013-2

Widespread increase in services sector
As for the services sector, the increase was widespread, with the employment (up 1.5 points) and new business (up 1.3 points) components leading the rise. Moreover, outstanding business also increased in September, moving above 50 to 50.1 (up 0.5 points) for the first time since June 2011, while the business expectations component also picked up, reaching a 18-month high (58.9).

Employment rose in both sectors, reaching the 50 threshold in the services sector for the first time since December 2011.

Similar trends in Germany and France, but at different levels

In terms of national developments, both German and French flash manufacturing PMI decreased in September, both against consensus expectations. Indeed, the German index fell by 0.5 points to 51.3 in September, while the French index only decreased slightly, from 49.7 in August to 49.5 in September. As for the services sectors, both countries posted a monthly gain with the French index reaching the 50 threshold.

Europe - PMI 24.09.2013-3

PMIs tend to confirm an underlying recovery process
Surveys proved to be more reliable indicators of the underlying trend of growth than industrial statistics that have been marred by strong volatility recently (strong industrial production in Q2 and probably negative industrial activity growth in Q3). Therefore, according to surveys the eurozone is on a recovery path even if it is likely to remain clunky and modest. As a result, we maintain our cautious scenario of modest growth in H2 and our GDP growth forecast of -0.5% for the whole year.

Europe - PMI 24.09.2013-4

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