In monthly surveys, managers in the manufacturing and service industries are asked whether business is better or worse compared to the previous month. The answers are then summarized in a single statistic: the manufacturers’ purchasing index (PMI). A value above 50 signals economic expansion, a value below 50 signals an economic slowdown.
New PMI data this week showed improvements in August in the UK, Europe and Japan. Of particular note is the UK, where the recent upswing in British economic growth shows no signs of slowing. Europe, on the other hand, benefited in part from the Paris Olympics, even if overall growth was not gold medal-worthy. And in Japan, numbers remained mostly on track, suggesting the country’s steady recovery is likely to continue.
Overall, the central banks of these economies are unlikely to change course as a result of the data. The European Central Bank will probably continue interest The Bank of England is expected to raise interest rates again in September, while it will probably wait until October. The Bank of Japan, on the other hand, is more limited in its ability to raise interest rates next year: it could raise interest rates slightly in October.
Economic surveys in Europe and Japan improved in August. Sources: abrdn, Haver.
- The British Composite Index (manufacturing and services combined) rose from 52.8 to 53.4, reflecting continued solid growth.
- The index for the eurozone rose to 51.2 from 50.2, suggesting that the bloc is heading for a slowdown but not a recession.
- The French data showed a divergence between the services sector (55) and the manufacturing sector (42.1) due to the Olympic effect.
- Japan’s Purchasing Managers’ Index (PMI) rose to 53 from 52.5 in the third quarter, in line with the ongoing economic recovery.
