Eurozone private sector continued to expand in August

Flash data from data provider IHS Markit showed that the eurozone’s private sector continued to grow during August, although the rate of growth remained one of the weakest seen over the past year-and-a-half.

The composite purchasing managers’ index (PMI), which covers both the manufacturing and the services sectors, rose marginally to 54.4 in August from 54.3 in July. This was slightly below economists’ average forecast of 54.5. The manufacturing sector PMI fell unexpectedly to a 21-month low of 54.6 in August from 55.1 in July. The reading was expected to rise slightly to 55.2. On the other hand, the services PMI also came in at 54.4, up from 54.2 the previous month.

Within the eurozone countries, growth accelerated in France and Germany but slowed across the rest of the currency bloc.

In the meantime, according to a report by the Bundesbank, Germany’s central bank, the country’s economy is likely to remain on a sound growth path in the third quarter but growth will probably be slower than the average for the first half of the year. Private consumption is expected to underpin growth but industry will make no meaningful contribution, according to the Bundesbank’s monthly economic report. The bank assessed the situation in the labour market as remaining very favourable.

Germany shifted into higher gear in the second quarter, growing faster than predicted. This was a relief for investors who had feared that a weather-related wobble that hit the eurozone economy in the first quarter might signal the end of the currency union’s five-year growth run.

Finally in the US, sales of previously owned homes unexpectedly fell for the fourth straight month in July, as a shortage of properties on the market pushed house prices higher, possibly sidelining some potential buyers in the process. The National Association of Realtors said that existing home sales dropped by 0.7 per cent to an annual rate of 5.34 million units in July, after falling by 0.6 per cent to a rate of 5.38 million units in June. Supply constraints have largely accounted for the slowing housing market, but there are growing worries that the higher property prices, together with rising mortgage costs, will dampen demand.

This report was compiled by Bank of Valletta for general information purposes only.

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