PMIs across most of the Eurozone improved in August…
Yesterday Markit economics published its monthly PMIs for the UK and the Eurozone. The composite PMI for the Eurozone improved from 44 in July to 45.1 in August as did many of the larger Eurozone economies.
… but they are still squarely negative.
The international environment does not bode well for export-focused manufacturers and continues to threaten the export-led recovery we have been hoping for.
- Ireland has been an outlier for most of this year. However, the drop in August brings Ireland closer to the negative territory that all other Eurozone countries have been in for the large part of 2012.
- The easing of the PMI in countries such as France, Germany and Spain may be an indication that that pressure is starting to ease off. But remaining in firm contraction territory they signal that the manufacturing sector is likely to continue to drag on Eurozone growth into the third quarter of 2012.
- The US PMI worsened slightly from 49.8 to 49.6 and the Fed has recently hinted that further quantitative easing might be on the cards.
- China, worryingly, has worsened once again as the uncertainty stemming from the Eurozone drags on growth prospects. The Eurozone crisis has permeated confidence around the world and emerging markets are feeling the pinch.
As Lee discussed in her blog yesterday, the weakening in economic indicators over the past few months, the slowdown in output and orders in our Business Trends survey and the worsening trade balance led us to lower our forecast for the year ahead. Unfortunately yesterday's PMIs reinforce the view that times look challenging for export-led manufacturers.