(News Bulletin 247) – The weakness of the PMI indices for the month of August published on Wednesday confirmed the economic slowdown at work in the euro zone, where growth should be negative in the third quarter.
The HCOB composite ‘flash’ PMI – which measures overall activity in the region – fell to 47 in the current month, from 48.6 in July, returning to a low of almost three years.
This figure, much lower than the consensus forecast, leads the authors of the survey to anticipate a contraction of GDP in the euro zone of 0.2% in the third quarter.
For analysts at Capital Economics, ‘there are plenty of reasons to expect a recession in the euro zone economy in the second half of the year’, in particular because of the sharp contraction in activity observed in Germany.
Their counterparts at Deutsche Bank believe that these disappointing figures are likely to call into question the optimistic view on growth so far favored by the European Central Bank (ECB).
“The current weakness in the manufacturing sector may not just be cyclical,” worries Mark Wall, the German bank’s chief economist for Europe.
‘It could reflect a more structural and more persistent competitiveness shock’, he underlines.
“As for the weakening of the services sector, it could show that the transmission of monetary tightening is stronger than what the rigorous ECB (hawks) anticipated,” said Mark Wall.
The economist thus expects the ECB to pause in its cycle of rate hikes in September, while specifying that the institution has probably not yet reached its final rates.
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