The Eurozone’s private sector activity faced a steeper decline in August, with the Composite PMI falling to a 33-month low of 46.7 points. This marks a concerning trend as the last time such low levels were seen outside the COVID-19 pandemic was during the sovereign debt crisis in March 2013. The Manufacturing PMI remains below the 50-point threshold for the 14th consecutive month, indicating persistent challenges in this sector. The Services sector also contributed to the slowdown, with the Services PMI dropping to 47.9 points. These disappointing figures suggest a bleak growth outlook for the Eurozone, raising the possibility of a contraction in Q3-23. The second half of 2023 is expected to pose more significant challenges for the Eurozone.
In contrast, Japan’s economy recorded growth for the third consecutive quarter in Q2-23. However, this growth was primarily driven by net exports, as domestic consumption remained sluggish. Real GDP grew by 1.2% q/q, although slightly below market expectations. Weakness in private consumption and capital expenditure signals the country’s fragile state amid a gloomy global economic backdrop. With risks to growth in H2-23 tilted to the downside due to weak domestic demand and capital expenditure, the Bank of Japan is expected to maintain loose monetary policy for the remainder of the year.
Global Markets
Global equities faced headwinds as investors reacted to weak Chinese export data, higher treasury bond yields, and concerns about inflationary pressures in the US. The US market recorded losses, with the DJIA falling by 1.0% and the S&P 500 dropping by 1.4%, as concerns about potential US Fed tightening weighed on investor sentiment. European equities also experienced losses due to worries about slowing global growth and lower-than-expected Eurozone GDP. Asian markets mirrored these losses, with the Nikkei 225 falling by 0.3% and the SSE declining by 0.5%. Emerging and Frontier market indices declined, driven by bearish sentiments in Iceland and Brazil, respectively.
