Summary of European PMIs and Economic Outlook

Date: 21 August 2026

Overview

The latest economic data from the eurozone indicates a stronger-than-expected performance in the Purchasing Managers' Index (PMI) for August 2026. The eurozone flash composite PMI rose to 52.1, surpassing the forecast of 51.7, suggesting a modest improvement in overall economic activity.

Country-Specific Insights

France

• The manufacturing business climate index in France increased to 103, exceeding expectations of 101.
• France's flash manufacturing PMI rose significantly from 49.8 to 51.5, indicating a return to expansion.
• However, the flash services PMI fell to 48.4, below the expected 49.4, indicating contraction in the services sector.
• The composite PMI for France slipped to 48.8, suggesting ongoing weakness in overall activity despite manufacturing gains.

Germany

• Germany's flash services PMI decreased to 48.5, falling short of the expected 50.1 and remaining in contraction territory.
• Conversely, the flash manufacturing PMI rose to 54.1 from 52.2, indicating stronger expansion in the manufacturing sector.
• The composite PMI for Germany eased to 51.0, slightly below the expected 51.3, but still indicates overall expansion.

Inflation Expectations

Eurozone inflation expectations showed a slight decline, with one-year expectations falling to 2.9% from 3.0% and three-year expectations easing to 2.7% from 2.8%. This suggests that households are less concerned about a potential inflation spiral, providing the European Central Bank (ECB) with more flexibility in policy decisions.

Conclusion

The data indicates that the eurozone is entering a more balanced economic phase. While growth is not robust, it is no longer weak, and the improvement in manufacturing alongside easing inflation expectations could create a healthier environment for European equities. However, the reliance on manufacturing growth, while services remain soft, suggests that the recovery is not yet fully secure.