Germany's August flash manufacturing PMI beat forecasts at 54.1, while France's private sector contracted further as services activity slowed. ECB policymaker Mārtiņš Kazāks said the September rate decision will hinge on incoming data, with markets pricing a 94% probability of a hike.
Germany's factories accelerated more than expected in August, with the flash manufacturing PMI at 54.1 versus 52.0 forecast, up from a prior 52.2. Services PMI came in at 48.5 against a 50.1 forecast, down from 49.8 previously. The composite PMI landed at 51.0 versus 51.3 expected, against a prior 51.3.
According to Phil Smith, Economics Associate Director at S&P Global Market Intelligence: "The recovery in the manufacturing sector has regained momentum". He added that output, new orders and export sales have all risen at their quickest rates since early 2022, which likely reflects catch-up from the subdued picture seen a few months earlier. The service sector, however, continues to act as a drag on growth.
France's private sector contracts further
The flash services PMI fell to 48.4 versus 49.8 expected, down from 49.6 prior. Manufacturing PMI rose to 51.5 against a 50.0 forecast, up from 49.8. The composite reading came in at 48.8 versus 49.5 expected, against a prior 49.4.
New orders decreased modestly, extending the current run of falling sales volumes to nine months. Input price inflation did slow to a five-month low, though the rate of increase in output charges stayed broadly unchanged.
ECB's Kazāks strikes a more cautious tone
ECB policymaker Mārtiņš Kazāks said inflation expectations remain anchored close to the central bank's target, and that wage growth is gradually slowing. He argued that forward guidance has become counterproductive given the uncertainty around geopolitical risks, energy markets and global growth prospects, and that policymakers should retain flexibility rather than commit to a specific path.
Kazāks said the September decision will be based on incoming economic data. The market, meanwhile, has already priced a 94% probability of a rate hike. He noted there are both pros and cons to raising rates further, a tone more cautious than his hawkish remarks in prior months.
Sources: Investinglive (Germany PMI), Investinglive (ECB's Kazāks), Investinglive (France PMI)
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