Preliminary composite PMI falls more than expected to 56.1
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- European manufacturing activity expanded at a more modest pace in August, indicating that the economic recovery has slowed, but remains on track for solid growth after a strong second quarter.
The preliminary euro-zone composite index compiled by Markit slipped to a two-month low of 56.1 this month, down from 56.7 in July, according to a monthly survey of purchasing managers released Monday.
Economists had forecast a more modest decline to 56.3.
A PMI of more than 50 indicates growth in activity, while a reading of less than 50 signals contraction.
The euro (EURUSD 1.2699, -0.0001, -0.0079%) traded at $1.2710 versus the U.S. dollar, little changed from Friday.
The data indicated the recovery "lost only slight momentum" from the second quarter, leaving gross domestic product on track for quarterly growth of 0.7%, said Chris Williamson, chief economist at Markit.
Euro-zone GDP expanded 1% in the second quarter, its strongest quarterly growth in three years. The expansion was driven in large part by 2.2% quarterly growth in Germany, its strongest quarterly expansion since 1990.
But the still-robust headline PMI number masks "worrying developments," Williamson said, noting that the recovery remains largely depended on strong growth in Germany, Europe's largest economy, and France, the second largest, while activity in the rest of the region slowed to "near stagnation."
Germany's composite index rose to 59.3 in August from 59.0, with a weaker reading in manufacturing offset by accelerating services activity.
For the euro zone as a whole, the manufacturing PMI slipped to a six-month low of 55.0 from 56.7 in July. The services index dropped to 55.6 from 55.8 last month.
"All in all, the manufacturing-led decline in the August composite PMI confirms that the euro zone is far from immune to the U.S.-led slowdown in global growth momentum," said Martin van Vliet, economist at ING Bank in Brussels. "But for the time being the index still points to decent growth. Let's enjoy it while it lasts."
