The composite PMI remained firm in August, increasing from 52 to 52.1. While downside risks seem to be all around us, the economy remains stubbornly decent for the moment.
The turmoil in the Middle East continues, and so do concerns about the eurozone economy. So far, the impact has been far from devastating, with continued modest economic growth in the first half of 2026. To paraphrase Nobel Prize winner Robert Solow: you can see geopolitics everywhere but in the eurozone GDP statistics.
Today’s PMI indicates that the third quarter continues to be decent from a growth perspective. July and August both came in well above the neutral reading of 50, indicating that the business economy is growing at a steady rate.
The PMI indicated a further acceleration in manufacturing activity, as the manufacturing output PMI increased from 52.9 to 53.4. This is the highest reading in four and a half years. Services had been a source of concern before but remained robust at 51.7.
And despite oil prices above $90 per barrel again, businesses indicate softening inflationary pressures. Both input cost growth and selling price growth eased this month, which takes away some of the more immediate concerns of core inflation quickly moving much higher on the flare-up of the Middle East conflict.
So what’s not to like? Well, clearly, with oil prices above $90 per barrel again and interest rates having repriced higher in recent weeks, the factors slowing growth and pushing up inflation for the months ahead are clear. Then again, the eurozone economy has been quite resilient so far, and momentum remains surprisingly decent. The third quarter seems set for a decent GDP growth print again, firmly ignoring current events.
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