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PATRIS Macro - Eurozone - Markit composite PMI remains close to its May low in September

21 Sep 2018


Eurozone: Flash September Markit PMI

Bottom line: The Markit composite PMI fell by 0.3 points in the preliminary reading for September to 54.2 (vs. consensus 54.5). The index remains close to its May low (54.1). The preliminary reading for September is the second lowest since November 2016. Manufacturing PMI fell by 1.3 points to 53.3 (vs. consensus 54.5), while services PMI rose by 0.3 points to 54.7 (vs. consensus 54.4), reaching a three-month high. 3Q18 average for the composite PMI stands at 54.3, compared to 54.7 in 2Q18 and 55.9 in 1H18.

New orders inflows for the region private business sector were the joint-weakest reading since October 2016. The Employment sub-index eased in September but remained close to its 18-year highs. New orders in manufacturing showed the joint-weakest rise since February 2015, as new export orders failed to grow for the first time since June 2013. In services, new inflows slowed, and backlog of work showed the second weakest rise in over a year. Input cost inflation remained elevated, reaching the third highest reading for over seven years. Average selling prices rose at an identical pace when compared to August, and remained high by standards of the past seven years. Business optimism increased slightly in September, but was still the second weakest over the past two years (the lowest in nearly four years in manufacturing, while services recorded a slight increase from August 21-month low).

The September Markit composite PMI remains consistent with a pace of expansion for the economy in 3Q18 similar to what was seen in 1H18 (+0.4%q/q). According to the data released for France and Germany (both countries showed declines in September), the rest of the region has recorded a slight increase in September


France: Markit composite PMI declined by 1.3 points to 53.6 in September, well below market expectations (54.6), the lowest print since December 2016. Both manufacturing (-1 point to 52.5, vs. consensus 53.3, and the lowest print for two years) and services (-1.1 points to 54.3, vs consensus 55.3, and the weakest reading since May) recorded declines in September. 3Q18 average now stands at 54.3, the lowest quarterly average since 4Q16, suggesting a weaker pace of economic growth.

The details of the survey showed inflows of new business in services grew at the slowest pace in nearly two years. Manufacturing firms saw a further reduction in demand from the automotive sector. New export orders contracted during September. The pace of job creation across private sector companies remained strong in the context of historical data, although it eased since August. On the price front, input price inflation accelerated during September, reflecting higher fuel bills and payroll rates. Output charges rose at a faster rate in September.

Germany: Markit/BME composite PMI declined by 0.3 points in September to 55.3 (vs. consensus 55.4), after the six-month high recorded in August, as the increase in services (+0.5 points to 56.5, vs. consensus 55.0, the second highest reading in over four years) was more than offset by the decline in manufacturing (-2.2 points to 53.7, vs. consensus 55.7, the weakest since April 2016). 3Q18 average now stands at 55.3, compared to 54.3 in 2Q18 and 55.8 in 1H18. The manufacturing PMI declined below that of services for the first time in almost two years.

The details of the survey showed that manufacturing order book rose only fractionally in September, and the least since December 2014. However, new business in services accelerated to the fastest since June 2011. The employment sub-index eased slightly from August’s near-record high. The rate of inflation in average prices charged by German private businesses softened slightly in September, after reaching the quickest for 7 months in August. Input cost inflation pulled back to the weakest print since May. Business confidence declined to a four-month low, with services at the highest level since April and manufacturers falling to the lowest in almost four years.

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