European Economy Sees Boost in Growth as Inflation Remains Under Control
The European economy is experiencing a boost in growth and inflation remains under control. The manufacturing PMI hit 52.8 in August, its highest since May 2022, driven by employment and new orders. Services remain stable at 51.7. Loans to households increased to 3.1% y/y in July, up from 3.0% in June. Real GDP for Q2 was confirmed at 0.4% q/q while employment rose again (+0.1% q/q).
The European Commission Sentiment surveys were solid in August, corroborating the PMI data: the ESI rose for the fourth month running (+1.3 pt to 98.4) to above February’s level. Indices in construction remain weak though.
Inflation edged up in July but remains energy driven. Headline CPI rose to 2.9% y/y and core CPI to 2.5% y/y, both broadly in line with consensus. Household inflation expectations eased to 2.9% at one year and remain anchored at 2.4% at five years.
In France, Q2 growth was weaker than expected but Q3 data is net positive so far. The main drivers are a downward revision of agricultural output and an upward revision of the services deflator. In parallel, households’ purchasing power decreased by 0.6% q/q in Q2.