Markit’s flash composite purchasing managers index, which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, rose to 55.3 from 54.4 in June.
Advertisement
The latest report from IHS Markit shows a contraction in the United Kingdom economy with the Purchasing Manager’s Index (PMI) at the lowest level since the financial crash in 2008/9. That missed expectations of a 48.9 flash reading and compares with 52.3 in June.
A PMI covering the euro zone’s dominant service industry beat expectations for a fall to 52.3 from 52.8 by only nudging down to 52.7, still an 18-month low.
Any measure on the index below 50 signifies the economy is contracting, meaning the month-on-month change suggests the United Kingdom went from modest growth to a slump in the space of a month.
It was consistent with an economy contracting 0.4 per cent in the third quarter, contrasting with an actual reading of plus 0.4 per cent in the first quarter.
But the manufacturing PMI was also in the doldrums with its reading falling to 49.1 from 52.1 in June.
Despite this, Markit chief economist Chris Williamson said the outlook for the German economy was encouraging and it appeared that the Brexit vote was having very little effect.
New orders from overseas grew for the first time in seven months, which Williamson said might reflect a weaker euro or that French firms might be picking up some business from British competitors after the Brexit referendum in June.
However new export business rose for the second straight month “and to the greatest extent for nearly two years”, which was “mainly linked to the sharp drop in the sterling exchange rate”.
“He could both loosen fiscal policy at a time when the economy may well need it but also he could claim that he wasn’t completely abandoning the conservative’s concern for being responsible with the public finances”, said Sam Hill, senior United Kingdom economist at RBC Capital Markets.
“The downside of the exchange rate was a steep rise in manufacturers’ input prices, mainly due to higher import costs”, wrote IHS Market in the data release.
The drop comes following the high level of order cancellations since 2012 and a lack of confidence in the service sectors, according to the consultancy.
Mr Williamson said the figures provided “a powerful argument for swift action” from the Bank of England as it weighs up whether to cut interest rates next month.
“The readings suggest we are heading for a recession again and it is nearly certain the BoE will pull the trigger on aggressive stimulus to boost aggregate demand”.
“The readings suggest we are heading for a recession again, and it is nearly certain the BOE will pull the trigger on aggressive stimulus to boost aggregate demand”, said Neil Wilson, markets analyst at ETX Capital, in a note.
“We will have the opportunity with our Autumn Statements.to reset fiscal policy if we deem it necessary to do so in light of the data that will emerge over the coming months”, he said on a visit to Beijing ahead of a meeting of G-20 finance ministers in Chengdu.
Advertisement
As comparison, the International Monetary Fund earlier this week said eurozone growth this year would hit a stronger than expected 1.6 percent, instead of the previously forecast 1.5 percent.
