Business survey points to continued euro area strength

Flash PMI suggests GDP growth may cool slightly in the third quarter, but dynamics of the euro area economy remain strong and broadly stable.

Markit’s composite flash purchasing managers index (PMI) for the euro area remained broadly stable at 55.8 in August, slightly above consensus expectations (55.5). By sector, the manufacturing PMI increased to 57.4, from 56.6 in July, offsetting a decline in the services PMI (-0.5 points to 54.9).

The euro area composite PMI is now consistent with GDP growth of 0.59% q-o-q in Q3, cooling down from what business surveys suggest was the level in the last quarter.

PMI surveys have tended to overestimate GDP growth of late, but even so, economic activity remains strong in the euro area. With this in mind, we are keeping unchanged our GDP growth forecast of 1.9% for the euro area for 2017 as a whole.

Turning to price dynamics, Markit mentioned that “the recent trend of easing inflationary pressures came to an end in August”. Thus, the European Central Bank remains on track for a cautious and gradual normalisation of monetary policy in 2018.

Read full report here

Comments are closed.