The downward trend of the manufacturing PMI has continued in August. In most advanced economies, the index is below 50, which corresponds to a contraction of activity in the manufacturing sector. A significant deterioration could be noted in the UK last month. The Chinese index has also dropped below 50. The drop in terms of new orders has been particularly large since the month of May. It is also widespread. In the euro area and most of its member countries as well as in the UK, the index has moved below the 46 mark. The readings are also very low in Mexico, the Czech Republic, Poland and Turkey. The situation has also deteriorated in China.
MANUFACTURING PMIDespite the low readings for the overall index, the employment survey continues to be remarkably resilient, although a gradual weakening can be observed. One can expect further declines, considering the worsening of the order book data. In terms of inflation dynamics, the percentage of companies confronted with higher input prices continues its downward trend. This is very broadbased across countries. However, the level of this index remains very high. The developments in terms of input prices have a positive influence on the output prices where fewer companies than before plan to raise their prices.
Nevertheless, like with the input prices, the index remains at a high level so this should be reflected in the evolution of producer and consumer prices. A welcome development is the shortening of delivery times, which points towards an easing of supply side tensions. However, delivery times are still long. Finally, the services PMI has continued to decline in the US and the euro area, continuing a downward trend that started several months ago. The euro area index is now slightly below 50 but, with the exception of Germany (at 47.7), the other member countries have an index (slightly) above 50.
William De Vijlder
