Not Much Change In Euro-Area PMIs

While the heads of state, bankers and economists have been meeting to address the Euro Area's financial crisis, purchasing managers in the manufacturing and service industries have been assessing the repercussions the crisis may be having on their business prospects. September PMIs for selected countries of the Euro Area and "Flash" estimates for October PMIs for France, Germany and the Euro Area were released today. The PMIs are diffusion indexes based on the percent difference between those who see improvement in their business and those who see deterioration. PMIs above 50% indicate an expansionary phase of the business while those below 50% indicate a contractionary phase. Final estimates of the PMIs for manufacturing for France, Germany and the Euro Area are shown in the first chart and for services in the second chart. It is clear from the charts that the crisis is having a dampening effect on business in manufacturing and services industries.

Among the Euro Area countries, in addition to a flash estimate for the entire area, flash estimates are given only for France and Germany. In spite of unsettled background, the October flash estimates for the manufacturing PMIs in France and Germany both showed slight improvements. In France, from 48.2% to 49.0% and in Germany, from 50.3% to 51.2%. Although the purchasing managers saw improvement in German manufacturing in October, the excess of those seeing improvement remains small. And in France, the slight improvement in the October Flash estimate is not enough to reverse the contractionary trend. Even though the October Flash estimates for France and Germany improved, the Flash estimate for the entire Euro Area declined from 48.5% to 47.3%. This suggests that the purchasing managers feel that, on balance, conditions in the remaining 15 countries that make up the Euro Area worsened rather than improved.

The October flash estimate for the French service industry was down sharply from 51.5% to 46.0% while that for Germany rose from 49.7% to 52.1%. Again there was a decline in the flash estimate for the whole Euro Area from 48.8% to 47.2%. This time, however, the French service area probably played a significant role in the decline.

It appears that currently the purchasing managers are in a waiting mood, reluctant to bet on the outcome of the crucial meetings now underway.