August PMI manufacturing indices: recovery in the Euro zone and in China. Emerging Asia ex-China slowing down

PMI manufacturing indices for August released today strengthened the view that Euro zone economy could extend the rebound started in Q2 – when GDP rose by 0.3% q/q – in H2 ’13. Euro zone PMI manufacturing index rose from 50.3 to 51.4, above an estimate of 51.3 published on Aug. 22. A reading above 50 indicates growth.
Euro zone figure is in line with a slight recovery in Q3 and Q4. Economic activity could improve in the quarters ahead but the risk of a return to recession in case of negative shocks are still very high, in our view.
Indices were above 50 in all major Euro zone countries, with the exception of France:

1)      German PMI rose from 50.7 to 51.8 (flash estimate 52.0). The revision in Germany does not seem meaningful. The trend remains positive   and industrial production is expected to continue growing in the months ahead despite market expectations for a correction of orders and output in July (data are due during the week);

2)      French PMI remained unchanged at 49.7. French data could increase concern on the recovery there. However, INSEE index for August rose more than expected, giving an opposite message compared to the PMI index. French outlook is still worrisome as competiveness is low and public finance continue to deteriorate;

3)      Italian PMI rose from 50.4 to 51.3 – the 27 month high of the index;

 

PMI indices also rose in Netherlands - from 50.8 to 53.5 – and in Spain – from 49.8 to 51.1. In Europe, UK PMI manufacturing index climbed from 54.8 to 57.2.
Positive news also came from China, where PMI manufacturing index was at 51.0 against market expectations at 50.6.
However, the picture in the emerging Asia ex-China was less positive, with indices below 50 - signalling contraction for the sector - in South Korea, India, and Indonesia.