MNI DATA ANALYSIS: Eurozone PMI Signals Steady Growth In Aug

--IHS Markit/CIPS EMU Composite PMI 54.5 in Aug (Flash 54.4) vs 54.3 in Jul

By Jamie Satchi

     LONDON (MNI) - Euro area economic growth was steady in August, aided by

solid growth rates in both the manufacturing and service sectors, an IHS Markit

survey published Wednesday showed. 

     The Eurozone Composite Purchasing Managers' Index (PMI) rose marginally to

54.5 in August, up from 54.3 in July, and slightly better than the earlier flash

estimate of 54.4. 

     While the index has signalled rising activity across the bloc for over five

years, standing above the neutral 50-threshold all through this period, growth

rates remain considerably below those delivered around the turn of the year. 

     "The Eurozone PMI shows the recent run of robust growth of business

activity, new orders and employment extending into August," said Chris

Williamson, Chief Business Economist at IHS Markit.

     "The survey data for the third quarter so far suggest the single currency

area is on course to at least match the 0.4% expansion of GDP seen in the second

quarter," he added. 

     --TRADE TENSIONS

     But a weakening in confidence levels concerned Williamson, who said it put

into question sustainability of growth.

     "The expansion is looking increasingly uneven and the business mood has

become more unsettled during the summer...the downturn in optimism raises

questions over whether this pace of growth can be sustained into the fourth

quarter," Williamson said. 

     Business expectations fell to a 23-month low in August as "global trade

tensions and the unknown impact on future activity continued to undermine

confidence," according to IHS Markit.

     On a national level, sentiment regarding future business among Spanish and

Italian firms fell to five-year lows, while French businesses were at their

least optimistic for a year-and-half.   

     --HIRING INTENTIONS STRONG

     Despite this moderation in optimism, firms on the whole were undeterred

from adding to their workforce, as hiring improved once again in August, rising

to a six-month high. 

     This was particularly concentrated in Germany, where employment growth rose

to its highest level since March 2011. Job creation in Italy, on the other hand,

was the weakest for a year.

     --INPUT COST PRESSURES

     Inflationary pressures eased to a three-month low in August but still

remain elevated, with a similar trend noticed across output prices.

     In the service sector, a combination of higher wage costs (especially in

Germany) and increased fuel prices resulted in another rise in company operating

expenses. Output charges also rose, with German output price inflation close to

a near-record pace. 

     There were reports of increased prices for agricultural products, likely

reflecting the hotter-than-usual-summer impact on harvests. Supply-side

shortages were also said to have underpinned manufacturing price pressures. 

     --"UNBALANCED GROWTH"

     Williamson also went on to highlight the uneven nature of growth split

across the bloc's member nations. While activity in Germany and France improved,

putting composite measures at respective six-month and two-month highs, Italy

saw its own composite measure slump to a 22-month low.  

     "Growth also looks worryingly unbalanced. Although all of the largest euro

countries have seen growth moderate so far this year, solid expansion is still

being signalled for Germany and, to a lesser extent, France," he said.

     "But Italy saw growth slow sharply in August to suggest the region's third

largest economy on course for its weakest expansion for nearly two years, while

in Spain the third quarter could be the worst for almost five years, barring a

noticeable pick of business activity during September," he added.

     --BROAD SECTOR SUPPORT

     Both the services and manufacturing continued to signal robust levels of

activity, underpinning the Composite reading. 

     The final Eurozone services business activity index, delivered alongside

the composite data, rose 0.2 points to 54.4 in August, in line with its earlier

flash estimate. The slight firming from July was attributed to higher levels of

new business and stronger hiring intentions.

     On the manufacturing front, activity also remained solid despite the

headline activity index softening half a point to 54.6 -- the lowest level in

just shy of two years. While output growth continued to expand, the slowdown in

manufacturing activity was driven by a moderation in export activity.  

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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