Preliminary PMI data for the Eurozone and the UK released at the end of last week showed a further weakening in economic activity in September. The Eurozone composite PMI improved slightly to 47.1 from 46.7 in August, as the relative strength of services offset a further decline in the manufacturing PMI to 43.4. Germany’s manufacturing PMI likely weighed on the regional index, although there was modest improvement to 39.8 in September from 39.1 in August.
The UK’s composite PMI slipped to 46.8 according to the flash September reading, down from 48.6 in August, and the lowest level in more than two and a half years. The Bank of England apparently had early access to the PMI data last week, and it likely contributed to the decision to keep rates on hold. The services PMI may have been particularly concerning, as it fell to 47.2 this month, the lowest level since January 2021.
Flash PMI data for the US showed a more resilient economy than in Europe, with the composite PMI largely unchanged from August at 50.1. While momentum in services activity has slowed in recent months, it remains in positive territory. There are some signs of a recovery in the manufacturing sector but output is likely to be affected by the autoworkers strike which began mid-September and may disrupt vehicle production for several weeks.
There is a raft of economic data for markets and policy makers to assess this week, including second estimates for Q2 GDP growth in the US and the UK. US personal income and spending data for August, along with the Fed’s preferred measures of inflation – headline and core PCE inflation – will also be closely watched, with core PCE inflation expected to dip below 4% for the first time in almost 2 years. Preliminary inflation data for the Eurozone is forecast to show further slowing in headline CPI in September, although it is likely to still be well above target.