Welcome to the land world
The Eurozone Composite PMI Fell To 59.5 in August
2021-08-25

While the Eurozone's economy lost some steam in August, it remained on a solid growth path in the third quarter, according to IHS Markit's August purchasing managers' index survey. But analysts said the survey showed that fears of a resurgence of the virus and continuing disruptions to supply chains were starting to take a toll on the European economy. 

IHS Markit released its preliminary composite PMI for August, falling slightly to 59.5 from a high point of 60.2 last month. As for the services sector, the PMI also slipped to 59.7 from 59.8 in July, less than expected. The manufacturing PMI fell to 61.5 from 62.8 in August, while the sub-index measuring output fell to 59.2 from 61.1. Due to supply delays, the delivery time index is near the low point of the survey and pushed up the cost of raw materials needed by the factory. The input price index was 87.3, still high, though slightly below July's record high of 89.2. The survey showed two straight months of strong job growth, a reflection that companies are ramping up operating capacity in response to increased demand. But high inflation and supply chain bottlenecks remain a concern for Europe's economic outlook.

Job growth triggers an acceleration in wage growth, which could lead to higher inflation. In addition, Asian supply is expected to continue to delay for some time in the future. As a result, momentum in Europe's manufacturing sector is slowing more than in services. The former fell to a six-month low in August and the latter to a two-month low.

The European Central bank will hold its regular meeting next month. The data will be important for the central bank's future decisions at a time when some policymakers have suggested reducing some of the stimuli. However, some economists said the August PMI survey pointed to signs of slowing growth in Europe. The escalating Delta virus outbreak and continuing supply chain constraints are starting to disrupt the European economy. European manufacturing is somewhat affected by supply shortages. But the service sector continues to expand at a rapid pace, meaning it will play an important role in economic growth this quarter.

In Germany, which is the locomotive of the European economy, the composite PM fell to a two-month low of 60.6 in August from 62.4 in July. Economists said The German economy while growing at a slightly slower pace, was still expanding at a healthy pace in the third quarter. France's composite PMI fell to a four-month low of 55.9 from 56.6.