European activity data are in the foreground this week. Wednesday sees the release of initial estimates of September purchasing managers’ indices for the eurozone as a whole, as well as indices for Germany and France. Further German activity data for September are out on Thursday with the Ifo survey.
The eurozone manufacturing PMI slipped to 52.3 in August from 52.4 in July with euro strength in the month taking the blame for reduced export growth. Further strengthening of the euro in September is expected to have a similar effect, pushing the manufacturing PMI down to 52.
Services in August fared a little better, the PMI increased to 54.4 from 54 in July. Services in Italy performed particularly well, hitting 54.6 from 52.0 over the same period. Analysts expect a marginal slowing in growth for the September data with the overall eurozone services PMI expected to hit 54.2.
PMI surveys for France are expected to show the economy is still struggling, especially the manufacturing sector. In the past 24 months the manufacturing PMI has registered only three months of expansion. The August reading came in at 48.3, well into contraction territory. September’s reading is expected to show a slowing in the rate of contraction, moving to 48.8. Services in France have performed better, an expansionary reading for August of 50.6 is expected to improve to 51 in September.
German PMIs are expected to continue the strong growth trend seen in the last year. Manufacturing hit 53.3 in August, however fears of a China slowdown are expected to push the index down to 52.7 in September. Services PMI came in at 54.9 in August. A slight reduction in growth is expected to push the index down to 54.4 in September.
The Ifo business confidence survey for Germany is out on Thursday when the September data are expected to reflect German business fears that a slowdown in China is now a real risk. The headline business climate index is expected to slip to 107.9 from 108.3 in August and business expectations are expected to fall to 101.6 from 102.2 in August.
Japanese inflation data for August are out on Friday. The headline rate dropped to 0.2 per cent year-on-year in July, from 0.4 per cent in June. Continued energy price deflation is expected to push the headline rate back down to 0.1 per cent year on year.
The Japanese core CPI measure (excluding fresh food) is expected to return to deflationary territory, falling to -0.1 per cent year-on-year after hitting zero in July.