Great Graphic: EMU PMI and GDP

This Great Graphic comes from Markit who is behind most of the purchasing managers surveys.  It shows the composite output index (blue line) and the euro zone GDP (orange line). They line up fairly well.  

The results are consistent with a small uptick in Q3 GDP after stagnating in Q2.  Parts of the periphery, like Ireland and Spain are doing considerably better, while Italy lags.   

If Spain and Ireland are the positive surprise this year, the loss of momentum of the German economy is an unpleasant surprise.   The German paper Die Zeit reports that the poor economic showing is beginning to worry policy makers.  The government is drafting potential emergency measures to counter the slowdown.  

Measures that are being contemplated are said to include:  allowing faster depreciation for companies to reduce taxes and spur private investment, more public investment, and possibly abolish utility taxes.   The press report suggest these measures will not be implemented unless the economy deteriorates further.   

That said, we look for a modest recovery in the next batch of data.  Tomorrow Germany report July factory orders.  They should recoup around half of June's 3.2% decline.  On Friday, Germany reports July industrial production.  A 0.4% gain is expected on the month after a 0.3% gain in June.  The workday adjusted year-over-year rate is likely to turn back positive from the -0.5% reading in June.