Euro area manufacturing PMI index falls in June, ECB likely to stay relatively upbeat about economic outlook

The final euro area manufacturing PMIs for June hinted at a sixth straight monthly moderation in the manufacturing activity, with the headline index falling by 0.6 points, slightly more than the preliminary estimate suggested, to an 18-month low of 54.9. The PMIs for output and new orders indicators both dropped further, to 54.2 and 53.2 respectively to leave their second quarter averages both down 3.8 points compared to the first quarter.

The new export orders PMI rose in June, but averaged just 53.1 in the second quarter, down a similar amount from the first quarter, implying that foreign demand was faded considerably, perhaps reflecting trade-war concerns. The indices for stock levels and work backlogs were similarly in line with weaker production growth, the latter at least implying perhaps that capacity constraints were becoming less of a problem than had appeared earlier in the year, noted Daiwa Capital Market Research in a report.

Among the member states, German manufacturing PMI was unrevised from the flash estimate at 55.9, down one point from May and likewise the lowest since end-2016. German output and orders growth seems to have decelerated but supply-side bottlenecks – which had seemed to be a considerable restraint on growth over past months – seem to be easing. However, the French manufacturing PMI was softer than previously thought, downwardly revised by 0.6 points from the flash estimate and by 1.9 points from May’s figure to 52.2, a 16-month low.

“While the manufacturing PMIs, like other survey indices, point to downside risks to growth, the ECB is likely to remain relatively upbeat about the economic outlook. We, too, will keep intact our GDP forecast of 0.4 percent Q/Q in each quarter of 2018”, added Daiwa Capital Market Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 21.1992, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 60.8292. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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