German manufacturing sector loses momentum. France still weak. ECB cannot change that but will still be asked for help
One shouldn’t read too much into the tiny change of the Euro area composite PMI as the decline was just 0.2 points to 52.3. The level points towards very slow growth. Stagnation is not far away.
The most worrying detail of today’s data is that the German manufacturing sector continues to lose momentum. The new orders component fell below 49 points (and to slightly below 50 for the Euro area). All in all, German PMIs are compatible with moderate growth driven by the domestic demand.
French data were mixed: up – but still well below 50 – in the manufacturing sector, and down to 49.4 in the service sector. No meaningful growth in sight in Q3.
Most policy makers in the ECB will probably take these numbers as evidence that the Governing Council should consider adding stimulus to the economy. Do asset puchases make France a better place to set up a plant? No. Does it change anything to headwinds for the German industry blowing in from Russia and China? No. But who else to ask for help if not the ECB as long as governments are unable or unwilling to create better conditions for growth?
Nordea