DWS: Purchasing managers’ indices predict slower growth ahead

DWS: Purchasing managers’ indices predict slower growth ahead

21 augustus 2020

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The purchasing managers' indices in the Eurozone fell significantly in August. The overall index fell from 54.9 points to 51.6 points. It is still above the expansion threshold of 50 points, but only just. The decline was particularly pronounced in the service sector (from 54.7 points to 50.1 points). Rising infection rates, travel warnings and concerns about new infection prevention measures are likely to be the main reasons for this.

Naturally, expectations have also clouded over, but still indicate hope for an improvement in the situation. In the manufacturing sector, it is mainly the employment component (43.9 points) that is driving the index down. This raises the question of whether all jobs that are currently kept afloat by short-time work schemes can be saved in the long term or whether unemployment will rise in the course of the year. On the positive side, it should be noted that new orders and exports are both well above 50 points and have even risen.

There were some regional differences. The purchasing managers' indices for France disappointed across the board. Both the service sector and manufacturing have fallen, the latter even below the expansion threshold. In Germany the situation is somewhat more positive. Here, at least the manufacturing sector was even able to make some gains.

The data confirm our view that the most dynamic part of the recovery could already be behind us and that a phase of weaker growth is now beginning. At the same time, the figures once again show that the EU rescue fund is necessary. Not least because of its support, we expect the Eurozone economy to return to its pre-crisis level as early as mid 2022.

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