Macro Flash: Eurozone recovery slowing down in August
The pace of recovery of the Eurozone economy following its sharp contraction in 2Q 2020 slowed down significantly in August. The Eurozone PMI Composite Index came up at 51.9, still largely in positive territory but significantly down from the 54.9 level reached in July. The Manufacturing Index remained on a healthy recovery trajectory thanks to the strong rebound observed in Germany (cf. our Macro Flash on German Manufacturing PMI) and despite the stagnation observed in France. However, the Services headline index came almost flat at 50.5, due to a marked growth slowdown in France and a return to contraction in Italy and Spain. Regardless of the softness observed in the Services sector, Confidence about the future continued to peak up reaching its highest level in two years. This confidence will need to be supported by additional monetary and fiscal stimulus, else it could fade out. Indeed, Eurozone inflation moved into negative territory for the first since 2016 and unemployment continued to grow across the Eurozone which bodes ill for domestic demand, especially given the record savings growth due to precautionary motives.