Return to Insights

PMIs in Focus

Contracting German PMIs, French PMIs also soften, and investors withdraw funds from Chinese equity market.

German PMIs Contract at Fastest Rate Since May 2020

This morning, data from the continent indicates that the HCOB Germany Composite PMIs dropped to 44.7 in August, falling at their greatest level since the pandemic in May 2020. The figure marked a considerable slowdown from last month’s print of 48.5 and also came well below expectations of 48.3. It also marked the fourth consecutive monthly fall.

Output in Germany’s service sector also fell for the first time this year and at its sharpest level since November 2022 as it hit 47.3. Meanwhile, factory activity also fell at its largest level in more than three years. The soft print comes as Europe’s largest economy saw growth of just 0% last quarter, itself on the back end of a recession.

The press release stated that “businesses remained pessimistic towards the outlook as rising interest rates, customer uncertainty and high inflation continued to weigh on demand for goods and services. Notably, the survey showed an increase in inflationary pressures, driven by accelerated cost and price increases in the service sector.” Following the press release, the Chief Economist at Hamburg Commercial Bank stated that “Any hope that the service sector might rescue the German economy has evaporated. Instead, the service sector is about to join the recession in manufacturing, which looks to have started in the second quarter. Our GDP nowcast model, which incorporates the PMI flash estimate, now indicates a deeper fall of the whole economy than it did before, at almost -1%.” Hence as some analysts look at the wider implications to German growth, speculation is growing over the extent to which this could feed into a downward trend across the continent.

French PMIs Also Contract

The continent was dealt another blow this morning with French PMIs also softening. The Composite PMI came in at 46.6, similarly below expectations of a 47.5 print. This matched last month’s level which itself was the greatest contraction since November 2020. This came as France’s manufacturing figure came in at 46.4 while services declined to 46.7. Notable shortfalls came from private sector exports which fell for the fourth consecutive month.

Here, one economist at HCOB stated that “the French economy is stuck in a rut, showing signs of struggle once again. For the third month straight, we’ve seen Europe’s second-largest economy shrinking, as indicated by the HCOB PMIs. Despite hopes of a positive economic outlook, the latest PMI data is throwing a curveball, hinting that we might be headed for a contraction in the third quarter.” More generally Eurozone PMIs also came in weak, delivering a composite level of 47, with a services and manufacturing figure of 48.3 and 43.7, respectively. All eyes now turn to UK PMIs released at 0930 this morning, along with US PMIs at 14:45.

Sell-Off Continues for Chinese Equities

Concerns around the world’s second largest economy have seen investors withdraw funds in droves from the Chinese equity market. The CSI 300 Index – which tracks the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange – has already slipped some 7% over the past month and 1.6% over the day. This brings the index to its lowest level since November and comes as the equivalent of some £7.3bn in overseas funds has been withdrawn from China in the last twelve-day period. The Hang Seng Index has also seen its longest losing streak since November 2021, with the blue-chip index going into bear market at the back end of last week.

The sell-off comes as China’s fragile property market, monetary loosening and lack of fiscal support measures continues to weigh on investor sentiment. On Monday the PBoC cut its 1-year loan prime rate by 0.1 percentage point, bringing it a record low of 3.45%. As we looked at earlier this week, the PBoC’s rate cut follows a deflationary CPI print earlier in the month which gave markets greater concern about the extent to which there has been a slump in demand throughout the economy.

Exports also dropped 14.5% on an annualised basis for July, indicating softening global demand, and raising concerns over whether Beijing will be able to reach their 5% growth target this year.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.



Find out how we have helped our clients meet their hedging requirements.

¿Se descarta otra caída del par EUR USD en las próximas sesiones?

Las previsiones de recortes de tipos siguen protagonizando el debate de los inversores. Se estima ahora, según las declaraciones de Simkus, que el BCE reducirá sus tipos de interés tres veces en lo que queda de año...

El par EUR USD se recupera tras seis sesiones consecutivas de pérdidas

Hoy, durante todo el día, tendremos reunión del Eurogrupo, y contaremos con declaraciones de Luis de Guindos y Schnabel...

Powell sostiene que “la política restrictiva necesita más tiempo para funcionar”

Hoy contaremos con datos de IPC en la zona euro. Además, tendremos que estar atentos a las palabras de algunos miembros del BCE...

Las tensiones en Oriente Medio dan impulso al USD

Hoy contaremos con el Índice ZEW de sentimiento económico, tanto en Alemania como en la zona euro...

Qué esperar después de una semana con algunas sorpresas

Durante la semana pasada vimos una pérdida de terreno significativa frente al dólar americano...

Consecuencias de la decisión de tipos del BCE

La jornada de ayer estuvo protagonizada por la decisión de tipos del BCE. No hubo sorpresas en la reunión de la institución central...

La inflación americana revoluciona el mercado

Hoy conoceremos, a las 14:15, la decisión de tipos de interés del BCE, previsiblemente sin cambios. Además, contaremos con declaraciones sobre la decisión en una conferencia de prensa...

Miradas puestas en el IPC de EE.UU

Al otro lado del atlántico vimos una jornada sin novedades significativas por el lado de indicadores económicos...

Encuentra más información con relación inteligentes en divisas