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Analysts at TD Securities note that this morning’s Eurozone flash PMIs for July showed an unexpected improvement in manufacturing, but slightly disappointing services results.

Key Quotes

“For France, the services PMI slipped from 55.9 to 55.3 (mkt 55.7), while manufacturing rose from 52.5 to 53.1 (mkt 52.5), although the tone was still pretty soft. The report notes that manufacturing exports were down for the first time since Sept 2016 as global trade tensions hampered foreign demand. The services side was more upbeat, despite the fall in the headline, and the report notes a further rise in new orders, robust economic conditions, and support from the World Cup.”

“For Germany, the manufacturing index rose from 55.9 to 57.3 (mkt 55.5), while services were essentially unchanged at 54.4. The big story here is the fact that after 6 months of declines, we finally saw a pick-up in the manufacturing index, so the worst of the deterioration in sentiment may finally be behind us. The details were okay, though not amazing, with a rise in output, orders, inventories, and supply chain delays.”

“Overall business confidence was still subdued, sitting at its second-lowest level in 20 months, but with services sentiment falling and manufacturing sentiment improving. It’s too early to get too excited though about German manufacturing activity, with the prospects still of auto tariffs from the US.”