Euro area August flash PMI figures hint at stable economic growth in Q3

The flash PMI figures released for the euro area for the month of August are expected to support the European Central Bank’s sentiment in the recovery but they might not alter the prudent approach when it comes to adjusting monetary policy.

The flash composite PMI came in at 55.8, marginally higher than July’s 55.7 and coming above the consensus expectations of 55.5. The manufacturing sector felt tailwind in Germany, France and the euro area, not least visible in a marked rise of the new orders components despite the stronger euro. The service PMI dropped by half a point.

The euro area figures are compatible with the expected economic growth of 0.6 percent in the third quarter, stated Nordea Bank in a research report. On the prices side, input and output prices rose slightly without hinting an acceleration in inflation.

These figures are unlikely to change the European Central Bank’s fundamental assessments of the economy. The recovery is strong. Meanwhile, core inflation is low and would most likely continue to rebound only very gradually. This is why the central bank stresses how vital it is for monetary policy to be persistent and prudent, noted Nordea Bank.

“We expect a similar message from Draghi when he speaks at the Jackson Hole Symposium on Friday. In our view, the ECB will wait for the policy meeting on 26 October to announce an extension and reduction of the monthly asset purchases”, added Nordea Bank.

At 18:00 GMT the FxWirePro's Hourly Strength Index of  Euro was highly bullish at 112.336, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -40.5488. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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