No recession. No strong growth either.
Euro area flash PMI numbers came in slightly weaker than expected but were in no way dramatic. The service sector looks quite robust, while manufacturing in losing steam.
Markit calls the data consistent with GDP growth of 0.3% q/q in Q3. Our recent experience with PMI numbers and a look at the whole picture leads us to expect less. However, one cannot read these numbers as a recession signal. Slow growth ahead.
In Germany, the manufacturing PMI fell only marginally. If the numbers have anything to do with actual GDP growth, German GDP will rise in Q3, and the decline in Q2 will be seen as an outlier. Ifo numbers will be out next Monday. They will probably show a significant drop in expectations, driven by the manufacturing sector.
The marked difference between Germany and France narrowed somewhat, but not in manufacturing. Calls that Germany should strengthen the service sector and thereby domestic demand are very justified. Unfortunately, this is not high on the government’s agenda.
French economy still stagnating
A rising service PMI lifted the French composite index by around half a point. Services account for 79% of gross value added. By contrast, the situation in the industry seems to turn even worse. New orders are shrinking and fell to the lowest level since spring 2013 although the French economy is less exposed to geopolitical tensions than the more open German economy.
Nordea