Europe: Stable, but rather soft optimism

4 min
Ana Boata
Ana Boata Senior Economist for Europe

Eurozone business confidence in September remained broadly stable. Composite PMI stood at 54.1 from 54.5 as the Services sector (54.7 from 54.4 in August) counterbalanced the fall in the Manufacturing PMI (-1.4 points to 53.2, the lowest level since Sept. 2016). The readings are in line with a +0.4%–0.5% q/q Eurozone GDP growth in Q3 against +0.4% in Q2. Country wise, Germany (55.3) and France (53.6) registered relatively robust rates of expansion in the Composite PMIs, Italy (52.4) remained broadly stable at low levels and Spain (52.5) reached its lowest level in almost five years. In the UK, stock building driven by rising Brexit uncertainty – but also stronger new orders – drove the Manufacturing PMI up by 1 point to 53.8. On the contrary, Services PMI softened to 53.9 from 54.3. Overall, business confidence suggests UK GDP growth to be at +0.3%–0.4% q/q in Q3 against +0.4% in Q2. This confirms a slowdown in activity in the coming quarters, mainly driven by less favorable external conditions such as lower global trade growth and rising vulnerabilities in the emerging markets.