Economy in Brief

French manufacturing and services sectors weakened in August. The climate indicator for industry fell to 96.2 from 100.7 and sits in the lower 20% of its historic range of values. The services indicator fell to 100 from 101.6 and has a queue percentile ranking in its 42.7 percentile, a standing below its historic median, but relatively stronger than the standing for industry.

Manufacturing Manufacturing production expectations weakened in August to -9.5 from -8.7 in July.

For production itself, the recent trend fell sharply to a -5.4 reading in August from 9.2 in July. Survey respondents present their own industries’ likely trend as stronger, giving it a +1 reading in August compared to a -4 reading in July. This means respondents were considerably more negative on the economy overall while expectations for their own individual industries were for conditions to improve.

Orders and demand in August fell sharply to -21.4 from -14.8 in July. Foreign orders and demand also fell sharply on the month to -15.3 from -5.1 in July. Inventory levels in general crept higher in August from July as July had crept higher from June.

Price trends in their own industries are still showing pressure, but less than in July, as the August reading was 2.8 compared to 6.9 in July. However, for the overall manufacturing price level, respondents saw overall stronger pressures, logging a 5.0 reading in August compared to 4.3 in July.

All the components show weaker values in August 2023 than in August 2022 with the sole exception of a slightly larger reading for inventories.

The percentile standings are calculated on data back to 2001; that process produces an overall percentile standing in manufacturing at the 20th percentile. For manufacturing production expectations, a 33-percentile standing emerges; the recent trend and the own industry or ‘personal likely trend’ for production are both weak standings, at their respective 16th and 18th percentiles. The orders and demand category has a 32.8 percentile standing with foreign orders and demand at a 36.8 percentile standing. Prices shown as ‘own industry’s likely trend’ are at a 47-percentile standing with the manufacturing price level at a 40.9 percentile standing. The only strong ranking in the table is for inventories; they have a 95-percentile standing and are rising. An environment where everything else is weak as inventories rise likely suggests undesired building. The INSEE manufacturing survey is weak and weakening.

The S&P Global flash PMI for August shows broad weakening with a couple of warmer spots as France and Japan showed stronger composite PMIs month-to-month. However, decaying on the month were the composite PMIs from the European Monetary Union, from Germany, from the United Kingdom, and from the United States. Only Japan showed strengthening across the board with improvement in manufacturing, services, and, of course, the composite. France showed resilience in the composite supported by manufacturing. Both Germany and the European Monetary Union showed month-to-month improvements in manufacturing, but they were not strong enough gains to translate to the composite index in the face of service sector weakness.

In August, only the U.K. and the U.S. show weakening in manufacturing, services, and the composite. The U.K. also shows triple weakening on those metrics in July as well. The U.S. does not follow that pattern because in July there was an improvement in manufacturing; however, in June the U.S. showed weakening in all three measures.

The overriding theme for the month, despite some mixed signals in month-to-month changes, is that the queue percentile standings are broadly and severely weak with the single exception of Japan where the services sector has a 92.5 percentile standing and the composite has an 88.7 percentile standing. Japan still has a subpar manufacturing sector with a 47.2 percentile standing. All the rest of the metrics in the table have queue percentile standings below the 50th percentile, meaning they're below their medians on data since January 2019, and for the most part, very substantially below their medians. For every reporting unit in the table, the standings for manufacturing are weaker than for services; the partial exception to that is France where the percentile standings for manufacturing and services are identical at a pathetically weak 9.4 percentile standing.

Compared to the responses in July, August does reflect some scattered improvements and August is also improved relative to the June period. In June there were only two sectors that were stronger; they were for manufacturing in the U.K. and in France.

Over three months there are net declines for all the countries and all the diffusion readings but the one exception being manufacturing in France which is up by 0.3 diffusion points over three months.

Assessing the PMI standings from January 2020 before COVID struck, all the sector readings for all the countries are weaker on balance except Japan. The composite in Japan is higher by 2.5 points, manufacturing is better by 0.9 points and services are better by 3.3 points over that period. But that is the exception. The U.S. composite is lower by 2.8 points, the European Monetary Union composite is lowered by 3.9 points, the U.K. composite is lower by 4.5 points, the French composite is lower by 5.0 points, and the German composite is lower by 6.4 points. After three and two-thirds years, most of the sectors were reporting weaker conditions than those that prevailed before COVID struck. It gives you some idea of the impact of COVID on the global economy. It created a short sharp recession in a lot of countries, but it has more broadly created a legacy of lethargy; the countries have had a very difficult time breaking out from it. The average percentile standing in manufacturing in August is a 9.7 percentile standing with services at a 29.9 percentile standing and the composite and a 22.6 percentile standing. Conditions are not only weaker than they were in January 2020, but compared to where they've been since 2019, they rank as extremely weak.