Markets
Flash EMU PMI surveys showed eurozone business activity continuing to rise in August amid stronger manufacturing growth. It sets the eurozone up for a robust increase in third quarter GDP around 0.3%, according to S&P Global Market Intelligence. The composite PMI rose from 52 to 52.1, the best level since November of last year and defying expectations for a pullback to 51.7. The services series was unchanged at 51.7 (vs 51.5). Rising tourism spending is helping boost growth, notably outside France and Germany, where the region collectively saw the fastest services growth for over three years. The manufacturing gauge went from 51.9 to 52.8 (vs 51.8 consensus; 51-month high). Alongside the increase in output, a further rise in new orders was also recorded, amid a first expansion in new export business in four-and-a-half years. EMU manufacturers also posted a rise in purchasing activity midway through Q3 2026. Stocks of inputs continued to fall, however, as purchased items were often used to support production. Sharply lengthening suppliers’ delivery times also hindered the ability of firms to replenish stocks. Firms also took on extra staff, while there were further signs of easing inflationary pressures. Improved manufacturing was in large part centred on Germany (fastest pace since January 2022). Sentiment regarding the year-ahead outlook for output eased to a three-month low and was weaker than the series average. Input and output price inflation slowed, but the latter was entirely due to Germany as well. Rates of increase ticked up in France and across the rest of the eurozone as a whole. The US August Composite PMI jumped from 54.5 to 56 (vs 54 consensus), fuelled by a surge in service sector activity and rising optimism. The survey data for the third quarter are currently pointing to annualized growth approaching 3%, up solidly from the 1.5% pace seen in the second quarter.
Today’s solid EMU PMIs printed too close to consensus to influence trading. Especially with a September ECB rate hike already fully discounted. Overall trading was muted after a volatile trading week. The front end of the US curve does underperform after US PMIs. Quiet returned at the very long end of global yield curves which benefited overall risk sentiment and kept EUR/USD together with the US PMI below 1.0705 technical resistance. Next week centers around US President Trump’s economic D-Day against Iran and its trading partners (Monday), July PCE deflators (Wednesday) and the Fed’s Jackson Hole meeting (Friday). Fed chair Warsh is scheduled to speak. While he prefers as little communication as possible, he might use the occasion to iron some things out given the chaotic unraveling of the July FOMC meeting. Some believe a reiteration of his hawkish intro in June would help put a lid at the (very) long end of the US yield curve.
News & Views
The National Bank of Belgium’s consumer confidence indicator worsened from -5 to -7 in August, matching the series long-term (40-yr) average. Sentiment deteriorated mainly due to a more pessimistic view on the macroeconomic environment. Belgian households viewed the economic situation as weaker than in July with the series dropping from -27 to -32 while unemployment expectations ticked higher from 14 to 16. On a personal level, little has changed. Households expect their financial situation to remain unchanged (-2) and have slightly lowered their saving intentions (22 from 23).
The UK composite PMI improved from 52.2 in July to 52.5 in August. Services carried the uptick with the sector expanding at the quickest rate in six months (52.8 from 52.1). Companies noted a steady upturn in client confidence and improving domestic conditions. Manufacturing output grew at a slower pace than in July (51.2 vs 52.9) amid geopolitical uncertainty and elevated cost pressures. Overall, economy-wide demand improved though with new orders increasing the fastest since February, especially domestically. Staffing numbers continued to fall in August, but the rate of job losses was only marginal and the least marked since October 2025. Input inflation quickened from July’s five-month low, driven in particular by the service economy. Respondents referred to higher fuel prices and suppliers passing on rising transportation costs with a number of firms also reporting higher wages. Prices charged/output inflation also picked up. Stronger order books and hopes for a steady economic turnaround supported business optimism for the year ahead in recovering to the highest since February, offsetting the dampening effect of elevated domestic political uncertainty, intense competition and rising input prices.
