S&P Global reported on the 21st that the flash eurozone composite purchasing managers' index for August came in at 52.1, up from 52.0 in July and the highest since last November. It also beat the Reuters consensus forecast of 51.7, with new orders growing at the fastest pace in 40 months and export orders, including those within the eurozone, rising for the first time since February 2022, when Russia invaded Ukraine. The manufacturing PMI rose to 52.8 from 51.9, the highest in more than four years, and output growth reached its strongest in 54 months, while the services PMI was unchanged at 51.7. Employment increased for the first time this year, with manufacturing resuming hiring after more than three years and services posting the fastest growth in eight months. Price pressures remained elevated but were easing, with input cost growth at a six-month low and output price inflation slowing to a five-month low. Chris Williamson, chief business economist at S&P Global Market Intelligence, said that given solid business sentiment, a recovering labour market and sticky inflation, the European Central Bank is likely to maintain a hawkish bias and cannot rule out a rate hike in the near term.
Strong PMI and hawkish ECB outlook lift German bond yields.
Strong PMI and sticky inflation suggest ECB may hike rates, pushing yields up.
