French, German Factory Activity Exceed Expectations

An employee at the Smart Cars factory is seen surrounded by engines as he works on the Smart Fortwo assembly line in Hambach, eastern France, December 11, 2012. REUTERS/Vincent Kessler

Buttressing the case that the Eurozone is mending following years of uncertainty, the Purchasing Managers Index (PMI) in France soared to 55.8 in August from 54.9 in July. That marked the biggest increase in France since 2011. Greater certainty following the election of Emmanuel Macro may be unleashing some pent-up demand in the country even as Macron is readying a labor overhaul.

IHS Markit, the firm that compiles the PMI noted in its release that employment appears to be strengthening in France as well:

“Bolstered by greater output and new orders, firms further added to their payrolls during August, thereby extending the current sequence of employment growth ten months. Job creation was evident at both service providers and manufacturers. Rates of expansion eased from the┬áprevious month but remained marked in both cases.”

Meanwhile, readings in the Eurozone’s biggest economy, Germany, were also strong. The manufacturing PMI in that country rose to 59.4 in August from 58.1 in July. Trevor Balchin, IHS Markit’s Senior Economist, stated that the strong showing in Germany meant that full year GDP growth forecasts for the country will likely be revised upward from the current 2.0%.

The PMI is a dispersion index, meaning readings about 50 indicate growth, while readings below 50 indicate contraction.

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