Eurozone business activity hits 15-month high despite tariffs
The data provide more evidence of Europe’s resilience to obstacles ranging from trade to wars
[BRUSSELS] The eurozone’s private sector grew at the quickest pace in 15 months as manufacturing exited a three-year downturn despite a deal locking in higher levies for exports to the US.
The Composite Purchasing Managers’ Index compiled by S&P Global rose to 51.1 in August from 50.9 in July, further above the 50 threshold separating expansion from contraction. Analysts had predicted a reading of 50.6.
While services weakened a little, in line with estimates, manufacturing saw a jump to 50.5, bucking expectations for a slight slowdown and recording its first expansion since June 2022. Germany’s factory sector also neared the end of a three-year slump.
“Things are getting better,” Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said on Thursday (Aug 21) in a statement. “Despite headwinds like US tariffs and general uncertainty, businesses across the eurozone seem to be coping reasonably well.”
The data provide more evidence of Europe’s resilience to obstacles ranging from trade to wars, and will support those European Central Bank (ECB) officials who say there is no rush into lowering interest rates further.
President Christine Lagarde said on Wednesday that the 15 per cent US levy on most goods from the European Union, which kicked in this month, is a touch above the level the ECB assumed in its June projections but “well below” a more severe scenario it had also mapped out.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Even so, the pact with President Donald Trump’s administration looks like it will crimp business in the months ahead, according to de la Rubia, who highlighted a second straight decline in foreign orders for eurozone manufacturers.
“US trade policy is leaving its mark,” he said. “Germany had been holding up well, possibly due to pre-emptive purchases from the US, but now it’s also seeing a drop in orders. France has climbed out of the deep hole of falling foreign demand over the last months, but incoming orders are still on the decline.”
The eurozone’s 20-nation economy unexpectedly eked out growth of 0.1 per cent in the second quarter, though this was significantly lower than the 0.6 per cent expansion in the previous three months, which was driven by tariff-related front-loading. Inflation is hovering around the ECB’s 2 per cent target.
Officials in Frankfurt are widely expected to leave the key deposit rate at 2 per cent when they reconvene after their summer break in September, extending a pause that began last month following a yearlong campaign of cuts.
PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP. BLOOMBERG
Share with us your feedback on BT's products and services
