The preliminary value of 51.7 points published by Markit for the purchasing managers' index (composite) today underpins economic hopes sparked by GDP figures for the second quarter. While the purchasing managers' indices for the two eurozone heavyweights, Germany and France, which have contributed significantly to the economic turnaround, are well above their second quarter average in the month under review, the rest of the euro area is also showing signs of economic recovery. The moderate upward trend for the EMU economy is likely to gain a broader footing in geographical terms in the second half of the year.
After spring months saw growth up by a substantial 0.7% in a quarter-on-quarter comparison, the German economy is continuing to pick up speed in the summer months. Increases in both sub-indices for the manufacturing and the services sector pushed the composite index up by 1.3 points to a value of 53.4. Burgeoning export demand resulted in the most marked surge in manufacturing production in more than two years. All in all, the optimism among purchasing managers supports our forecast of strong growth in the third quarter.
Francehad thrown off the shackles of its mild recession with solid GDP growth to the tune of 0.5% in the second quarter. The return to growth failed to inspire any sort of euphoria among French purchasing managers, though. The value for August confirms our assumption of a continued economic recovery at a slower pace of growth in the current quarter. In August, the composite index dipped by 1.2 points to a value of 47.9, meaning that it is still lingering below the 50-point mark. While the manufacturing index stopped for a breather (49.7), the services index moved down a gear compared with a month earlier (47.7 points, -0.9 points), although being still well ahead of its second quarter average.
Even if the strong growth seen in Portugalin spring is likely to remain an exception, the month under review saw economic output across the rest of the eurozone rise, on the whole, for the first time since May 2011. The data published today therefore reaffirm our view that growth will broaden geographically in the second half of the year, further narrowing the north-south divide. The manufacturing output index outside of France and Germany climbed for the second time running and the service sector reported increased business for the first time since May 2011.
The gap separating the purchasing managers' index from the expansion threshold is still narrow, which points towards only a moderate pace of growth. We are penciling in EMU quarterly growth rates similar to those seen in the second quarter. Over the year as a whole, despite the current economic recovery, the eurozone economy will shrink by an average 0.3%.