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PATRIS MACRO - Eurozone - Key Takeaways from September

3 Oct 2018

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Eurozone: September Final Services/Composite PMIs

Bottom-line: The Markit composite PMI final print for September was little changed compared to the flash reading (-0.1 points to 54.1), still consistent with a 0.4%q/q rate of expansion for GDP in the region. The revision leaves the PMI 0.4 points down in September. 3Q18 average for the composite index stood at 54.3 (vs. 54.7 in 2Q18). This is the lowest quarterly average since 4Q16. September’s PMIs showed divergent trends between manufacturing (lowest since May 2016) and services (three-month high).

The employment sub-index for the services sector reached a high for almost 11 years. The input prices sub-index stood at the highest level since April 2011. Output prices rose in response, although subdued pricing power continues to be seen in Italy, Spain and to a lesser degree in France. Business confidence improved on August’s 21-month low, but remained historically subdued (optimism was the weakest in Germany and Italy, and remained the highest in Ireland).

Details:

Spain: Markit composite PMI declined by 0.5 points in September to 52.5 (vs. consensus 53.1). Markit services PMI fell by 0.2 points to 52.5 (vs. consensus 52.9). 3Q18 average for the composite index stood at 52.7, well below the 2Q18 average (55.4).This is the lowest quarterly average since 4Q13.

Details for the services survey showed the new order sub-index at a 21-month low in September. Activity, new orders and employment sub-indexes recorded all declines. The employment sub-index eased for the fourth month in a row and was the lowest since April. Business confidence reached the lowest level in over five years. The output prices sub-index was barely in expansionary territory (and at the weakest pace in the current five-month sequence of inflation for the sector), despite a further sharp increase in input costs (although the sub-index eased to a one-year low), with respondents noting higher costs for fuel, energy and staff. In its press release, Markit stresses that the PMI data is consistent with a quarterly GDP growth of around 0.5%.

Italy: Markit composite PMI rose by 0.7 points in September to 52.4 (vs. consensus 51.8). Markit services PMI increased by 0.7 points to 53.3 (vs. consensus 52.8). 3Q18 average for the composite index stood at 52.4 (vs. 53.2 in 2Q18). This is the lowest quarterly average since 3Q16.

Details for the services sector showed increases in activity, new business (a three-month high) and employment (highest since May) sub-indexes. Business confidence was also slightly higher, as firms signaled plans for new investment over the coming 12 months. The input prices sub-index rose to the strongest reading for over three years. However, output charges were again slightly down, reflecting competitive pressures.

Other countries: In France, the composite PMI index was revised up by 0.4 points to 54.0 from the flash reading. The revision left the index 0.9 points down in September. In Germany, the composite PMI index was revised down by 0.3 points to 55.0 from the flash reading. The revision left the index 0.6 points down in September. In Ireland, the composite PMI index was unchanged at 58.4.

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