Saturday

20th Jan 2018

Eurozone activity high after Brexit

  • Activity in August was driven by demands in services but manufacturing slowed down. (Photo: europa.eu)

Economic activity in the eurozone reached a seven-month high in August and British industry was supported by exports, despite uncertainties following the British vote to leave the EU, according to reports published on Tuesday (23 August).


For the eurozone, the composite Purchasing Managers' Index (PMI), an indicator of activity in manufacturing and services, rose to 53.3 in August from 53.2 in July and 53.1 in June, when the UK referendum took place.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The index relies on analysis of output, new orders, deliveries, employment and prices to evaluate private sector economy. A PMI of 50 or more indicates a growth of activity, while a PMI under 50 indicates a contraction.

The August figures show that the eurozone "remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by ‘Brexit’ uncertainty", said Chris Williamson, chief business economist at IHS Markit, the company that produces the PMI.

Growth remains fragile, however. Activity in August was driven by demand in services, but Markit found that "business expectations about the year ahead among service providers fell to its lowest since December 2014".

Meanwhile, manufacturing activity fell to a three-month low, and "although employment rose again in August, the rate of increase slowed to a three-month low", the report noted.

Germany once again was "a key engine of the eurozone’s overall expansion", with France "on course for its best quarter of growth so far this year".

ECB will 'do more'

“While the resilience of the PMI in August will add to the belief that the ECB [the European Central Bank] will see no need for any immediate further stimulus, the weakness of the overall pace of expansion and disappointing trends in hiring, order books, business optimism and prices all suggest that policymakers will keep the door open for more stimulus later in the year,” Chris Williamson said.

Last month, ECB president Mario Draghi said the institutions would be ready to use "all instruments" to maintain economic activity.



Ahead of the next meeting of the ECB's governing council on 8 September, executive board member Benoit Coeure said the ECB could "do more" if governments did not act.

“If there is not much taking place on the structural reform front, if there is not much taking place on the fiscal policy front ... then the ECB will do more,” he said at a conference in Geneva on Tuesday.

UK exports

In the UK, figures published by the Confederation of British Industry (CBI) showed that export orders for British manufacturing firms reached a two-year high in August.

The trend suggests that "the depreciation of sterling since the end of last year may be feeding through to stronger overseas demand", the CBI said.

The boost in exports also helped British manufacturing to maintain its level after the Brexit vote.

The CBI noted that 19 percent of businesses reported that total orders were above normal in August, compared with 18 percent in July, but 24 percent reported that orders were below normal.

"The pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices," the CBI said.

The business association added that British industry was waiting for "ambitious decisions" from the government to "secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon".

German coalition deal aims for 'Macron-lite' EU renewal

Merkel and Schulz clear the first hurdle of coalition talks, but the SPD's full membership backing is still needed. The likely coalition parties express support for Macron's eurozone reform ideas, but remain cautious.

News in Brief

  1. Germany confirms attendance at air quality summit
  2. Nearly half of 'fixed' Dieselgate cars show problems
  3. YouTube, Twitter, Facebook up hate speech deletion
  4. UK mulls bridge to France
  5. German far-right float anti-asylum bill
  6. EU Parliament to investigate glyphosate-decision process
  7. 'Mutagenesis' falls outside EU's GMO rules, says EU top lawyer
  8. Decision on Polish MEP's Nazi-era slur postponed

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  2. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  3. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  6. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  7. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  8. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  9. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  10. ACCAWelcomes the Start of the New Bulgarian Presidency
  11. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  12. EU2017EEVAT on Electronic Commerce: New Rules Adopted

Latest News

  1. Middle East, Messi and missing MEPs on the agenda This WEEK
  2. Instagram and Google Plus join EU anti-hate speech drive
  3. EU wants 'entrepreneurship' in education systems
  4. UK loses EU satellite centre to Spain
  5. Pay into EU budget for market access, Macron tells May
  6. Ethiopian regime to get EU migrants' names
  7. EU to lend Greece up to €7bn more next week
  8. Nato prepares to take in Macedonia