After proving resilient, the PMI surveys for the services sector are deteriorating more significantly. The indicator lost 3 points in August to 47.9, the lowest level seen since February 2021. In particular, the sub-indices relating to employment and new business creation fell significantly. In the manufacturing sector, the PMI rose slightly (+0.8 points to 43.5 points), but still indicates a significant downturn in industrial activity. Industrial production has indeed fallen since the beginning of the year, but not as sharply as suggested by business surveys. Activity in the industries most affected by rising energy prices (chemicals, metallurgy) contracted significantly. This was partly offset by a rebound in transport equipment production. However, weak demand is increasingly slowing company production, according to the European Commission’s quarterly survey. At the same time, supply shortages (equipment, labour) are easing but remain significant.
These less encouraging outlooks on the corporate side are not currently reflected in household confidence, which has been moving in the opposite direction to inflation for nearly two years. Consumer confidence has therefore improved over the past few months, in line with the slowdown in consumer prices. The Harmonized Index of Consumer Prices (HICP) fell back to 5.2% y/y in August, at a pace marginally below core inflation (5.3% y/y). However, the fall in headline inflation is beginning to stall, after several months of decline, as energy deflation recedes.
The labour market in the eurozone continued to be resilient in July, as the unemployment rate remains stable at 6.4%. We do not foresee a recession in the eurozone, but a stagnation of activity in H2, followed by a slight recovery in 2024. At 0.6% as an annual average in 2023, our growth forecast is similar to the OECD forecast (as at 19 September), but slightly lower than the projections of the ECB (0.7% as at 14 September) and the European Commission (0.8% as at 11 September). Similarly to 2022, dynamics will be far from uniform among eurozone countries in 2023. Germany and, to a lesser extent, France should push growth figures down, while Italy, and especially Spain, should provide the main support for growth.
Guillaume Derrien
