Euro area manufacturing expansion continues in August, led by Germany, PMI shows
Key Takeaways
- •Eurozone manufacturing activity expanded in August, with the final PMI at 52.7, slightly below the preliminary 52.8 but above July’s 51.9.
- •Factory output and new orders increased at their fastest pace since early 2022, indicating a broad improvement in industrial conditions.
- •Germany delivered the largest boost to the report, posting its strongest manufacturing growth in more than four years.
- •Inflation pressures eased further, although input and output price growth stayed above pre-conflict levels.
- •Business confidence rose for a fourth consecutive month and remained above its long-term average, pointing to firmer demand expectations.
Eurozone August final manufacturing PMI 52.7 vs 52.8 prelim
Prior 51.9
The final estimate confirms a solid reading for euro area industrial activity in August, with both factory output and new orders rising at their fastest pace since early 2022. The figures point to a broad-based improvement in manufacturing conditions at a time when Europe’s industrial sector has been under pressure from weak demand, higher financing costs and supply disruptions over the past two years.
Inflation pressures also continued to ease, although the rates of increase in both input costs and output prices remained above those seen immediately before the US-Iran conflict. That matters for policymakers because manufacturing price trends are one of the signals watched for any further cooling in inflation across the bloc.
The largest positive contribution to the overall report came from Germany, which posted its strongest month of manufacturing sector growth in more than four years. That will offer some relief after the persistent weakness that has surrounded the industry in recent years, especially given Germany’s outsized role in the euro area’s factory base.
Business confidence also improved again in August, marking a fourth straight monthly increase in growth expectations for the next 12 months. Overall optimism was also above its long-term average, suggesting firms are seeing steadier demand conditions than earlier in the year.
S&P Global said:
"The August PMI report provided the clearest signs yet that the eurozone's industrial economy has so far shaken off both the oil price shock and supply-related disruptions caused by the Middle East war. Stronger order book growth, in part owing to a recovery in export demand, should give this expansion legs. "
"Breaking the PMI data down by the three main industrial groupings revealed the intermediate goods sub-sector as the main contributor of manufacturing growth. This includes critical industries such as chemicals and metals, as well as electrical equipment and electronic components, suggesting the euro area can also be a beneficiary from the tech supercycle, even if it's arriving late to the party. "
"A further softening of producer price increases, even in the midst of sustained oil market volatility, helps to alleviate broader inflation worries. That said, the pace of disinflation is starting to level off and the PMI's price metrics remain well above their pre-war levels, which may just embolden a cautious stance by eurozone monetary policymakers."
