The Markit Flash Eurozone Composite Output
Index gave back the ground it made in July, posting 52.8 in August, down from
53.8. The headline index has now remained above the neutral 50.0 mark for 14
successive months - -
official data show that Eurozone industrial production fell in both May and June.
Although the rate of increase was broadly in line with the
average for the current sequence of expansion, it was nonetheless the
joint-weakest in the year-to-date and consistent with only a low pace of GDP
growth (approximately 0.3%).
Output increased in both the manufacturing and service
sectors, with service providers again reporting the sharper rate of expansion.
However, rates of growth eased in both sectors. The extent of the slowing was
much sharper in manufacturing, taking its rate of expansion to the weakest in
the current 14-month sequence of production growth.
Markit said the ongoing subdued and fragile nature of the
upturn in economic activity also remains too weak to encourage companies to take
on staff in sufficiently large numbers to have a meaningful impact on
unemployment. August saw job creation slow to near-stagnation, albeit still an
improvement on the steep job losses seen this time last year, as a slight
increase in employment at service providers was offset by further cuts at
Economic and geopolitical uncertainties,
alongside the continuing need to maintain cost competiveness, are also acting as
brakes on job creation.
The growth rate of new business ticked higher in August.
Market conditions brightened slightly for service providers, as new work
received increased at the joint-quickest pace since May 2011. The downside was
this being partly offset by the slowest increases in both manufacturing new
orders and new export business in over a year.
On the cost front, average input prices rose for the
fifteenth month running in August. However, the rate of increase eased to a
three-month low and was well below the long-run survey average. Meanwhile, the
ongoing subdued overall level of demand and rising competitive pressures led to
a further cut in average output prices. Selling prices have fallen in each month
since April 2012, with the latest cut the sharpest in three months.
Looking at the data by country, the marked divergence
between the performances of Germany and France showed signs of narrowing.
Output in Germany rose for the sixteenth straight month in
August. Although the pace of expansion eased from July’s three-month high, it
was still solid and above the average for that sequence. Meanwhile, economic
activity stabilised in France following contractions in the prior three months.
The divergence between the labour markets of the big-two
nations continued, however, as Germany saw a modest gain in employee numbers at
a time when France reported the steepest pace of job losses since February.
Further progress was made by the nations outside of the
big-two, with economic output rising (on average) for the thirteenth successive
month and a further slight increase in payroll numbers. However, on a more
cautionary note, the pace of output expansion eased to its weakest in the year
so far, reflecting a similar slowdown in new business growth.
Rob Dobson, senior
economist at Markit said: "The Eurozone
economy continued to make steady progress in August, as the region looks to
bounce back following the recent weaker-than-expected GDP readings for the
"However, with the PMI Output Index slipping slightly to 52.8, the region
remains on course to register growth of only around 0.3%-0.4% in the third
quarter, a level that is unlikely to stimulate any real turnaround in the labour
"Even before rising geopolitical headwinds began to buffet the economy, the
double-digit unemployment rate prevailing in the Eurozone was already
excessively high. Signs are that the modest job creation of recent months has
stalled in August.
"There are some positive points coming out of the national data, however,
with Germany recording solid growth and France stabilising following a brief
period of contraction. Further progress was also made outside of the big-two
economies, although signs that output and new order growth slowed sharply over
the month adds a cautionary note for the outlook in the „periphery‟.
"The muted rate of expansion and stalling labour market recovery will keep
already-watchful eyes on the ECB for any signals that the ground is being
softened for further supportive measures. However, it is most likely that
policymakers will allow recent stimulus efforts to have a greater chance to
filter through to the real economy before making any further moves."