PMIs disappoint in Germany and Eurozone

Flash PMI indices in Germany and in the whole Eurozone dropped and surprised to the downside in August. Moreover, the Composite PMI Index was below the threshold of 50 both in Germany and in the whole Eurozone, meaning the economies are in a contraction zone. As far as Eurozone is concerned, it seems that the positive momentum from the Olympics disappeared. Such a steep drop of Composite PMI Index in Eurozone seems to be mainly driven by a sharp decline in services sentiment in France. Also, the manufacturing sector remains problematic. The Manufacturing PMI index in the Eurozone is in the recession zone already for the twenty-seventh months while in Germany it is at the lowest level (40.3) in one year. The continued declines in both domestic and export orders do not indicate an improvement in the near term. Moreover, expectations about the future continue to fall as well. The underlying weakness of industry sector in Germany is already visible in the region. Most recently, Poland published industrial output growth in August that was disappointing and reflects the underperformance of German economy.