• Prior 42.7

This just points to another contraction in euro area manufacturing with things in Germany looking the worst. And that's not a good sign for the Eurozone as a whole when Germany is the backbone of the economy with the manufacturing sector being the key driver. But at least for now in August, the signs of easing are receding but we'll see if there will be any further improvements in Q4. HCOB notes that:

“These numbers aren't as terrible as they might look at first glance. Obviously, the overall PMI manufacturing index, sitting at 43.5, suggests pretty noticeable weakness in this sector. However, all of the twelve subindices have moved upwards or remained practically unchanged, showing that the downward trend from the past few months is starting to lose steam across the board.

“Businesses are still holding back from making big staff cuts, even with a substantial drop in output over five months. This does not bode well for productivity or output per head, but provides some stability for the economy as a whole as people do not lose their income.

“Looking at the PMI price indices, companies were able to keep part of the reductions of input costs for themselves since spring of this year, thereby increasing their profit margins. However, the experience of 2020 and 2021 shows, that on the way up this development tends to reverse and margins suffer.

“The driver of the downturn has been the destocking cycle. There are tentative signs, however, that this process is nearing its end as companies took their foot off the gas when it came to reducing the stock of purchases in August.

“Germany remains a negative outlier among the big euro countries. This will fuel the discussion about Germany being the sick man of Europe, even though the nation continues to be among the most diversified economies.”