France : PMI Composite
French private sector activity in August expanded at a significantly slower pace than indicated in the flash report according to the final PMI data for the month. At just 50.2, a 7-month low, the key composite output index was revised down an unusually large 1.1 points versus its preliminary reading to stand 1.3 points below its final July mark and close enough to 50 to signal a period of virtual stagnation in economic activity.

The flash service sector PMI was reduced by 1.2 points to 50.6, also a 7-month trough. As previously indicated, what growth there was reflected stronger new orders and rising backlogs although the growth rate of both hit multi-month lows. Certainly firms were not confident enough to add to headcount although, rather surprisingly, business expectations still climbed to their highest level since March 2012.

Meantime, another increase in input costs saw margins squeezed still further as service provider charges continued to fall.

The final PMI figures suggest that the French economy was really struggling last month. Total output was only flat in the April-June period and the survey data so far suggest little better this quarter.

Germany : PMI Composite
August’s flash composite output index was revised up a full point to 55.0 in the final data for the month. The new level was 1.3 points above July’s final reading, a 5-month high and strong enough to indicate a solid performance by the economy in mid-quarter.

The adjustment to the composite output gauge came courtesy of the service sector for which the preliminary PMI was revised some 1.3 points firmer to 54.9, also its best reading in five months. New orders rose strongly, backlogs were up and employment posted its largest gain since February. Against this backdrop, business expectations for the year ahead climbed to a 4-month peak.

What little progress they continue to make will evaporate with a strong euro, which I see as inevitable given their trade surplus:

European Union : PMI Composite
The final composite output index for August weighed in at 54.3, a couple of ticks stronger than its flash estimate and 0.4 points above its final July mark.

The flash services PMI was nudged just 0.1 points higher but, at 54.4, now matches June’s 4-year high. Increased output was supported by rising new orders and a sizeable increase in backlogs which, in turn, helped to ensure that employment growth remained respectably buoyant. Firms also became more optimistic about the economic outlook and business expectations for the year ahead climbed higher following July’s 7-month low. Meantime, inflation developments were mixed. Hence, although higher wages and salaries prompted another rise in input costs, margins were squeezed further as service provider charges declined for a remarkable forty-fifth consecutive month.

Regionally, the best performer in terms of the composite output measure was Ireland (59.7) ahead of Spain (58.8) and Italy (55.0 and a 53-month high). Germany (55.0) also had a good month but France (50.2 and a 7-month low) all but stagnated and remains a real problem for Eurozone economic growth.

The final PMI figures suggest that the Eurozone economy is on course for something close to a 0.4 percent quarterly growth rate in the current period, a slight improvement on the second quarter’s 0.3 percent rate. While this would be good news, faster rates of expansion will likely be needed if inflation is to meet the ECB’s near-2 percent target over the central bank’s 2-year policy horizon.

European Union : Retail Sales
Retail sales were slightly weaker than expected in August but with July’s decline more than halved, annual growth of purchases still comfortably exceeded the market consensus. Volumes were 0.4 percent firmer on the month after a 0.2 percent drop in June for a workday adjusted yearly rise of 2.7 percent, up from 1.7 percent last time.

July’s monthly rebound was led by a 0.8 percent jump in purchases of auto fuel and without this, non-food sales were just 0.1 percent higher having only stagnated in June. Food recorded a 0.2 percent advance. As a result, overall sales in July were 0.3 percent above their average level in the second quarter when they also increased 0.3 percent.

Regionally the advance was dominated by a 1.4 percent monthly jump in Germany. Spain (0.6 percent) also made a positive contribution but France (minus 0.2 percent) saw its first decline since March. Elsewhere, there were solid gains in Estonia (2.5 percent), Malta and Portugal (both 1.1 percent) but Slovakia (minus 0.2 percent) struggled.

Growth of retail sales has slowed in recent months, in keeping with signs that consumer confidence may have peaked, at least for now. According to the latest EU Commission survey, household morale improved slightly in August but still registered its second weakest reading since January. Consumption may continue to rise over coming months but the signs are that its contribution to real GDP growth will be only limited.

I’ve been suggesting exports would slow more than what’s been reported so far, though year over year numbers are in decline. It may show up in revisions down the road:


International Trade

The nation’s trade gap narrowed to a nearly as expected $41.9 billion in July following an upward revised gap of $45.2 billion in June (initially $43.8 billion). The improvement reflects a monthly rise of 0.4 percent in exports, which were led by autos, and a 1.1 percent contraction in imports that reflected a decline in pharmaceutical preparations and cell phones which helped offset a monthly rise in imports of oil where prices were higher in July.

Aside from autos, exports of industrial supplies, specifically nonmonetary gold, were strong in July while exports of capital goods also expanded. This helped offset a monthly decline in exports of civilian aircraft and consumer goods. Turning again to imports, other details include a rise in capital goods in what is the latest sign of life for business investment.

By nation, the gap with China widened slightly, to an unadjusted $31.6 billion in the month, while the gap with the EU widened more substantially to $15.2 billion, again unadjusted which makes month-to-month conclusions difficult. Gaps with Mexico and Canada both narrowed.

This report is another positive start to the quarter and will lift early third-quarter GDP estimates. But these will be cautious estimates as recent market turbulence pushes back conclusions and will make August’s trade data especially revealing.

Lower but still indicating ok expansion:

Saudi price setting adjustment:

Aramco Cuts All October Crude Pricing to U.S., Northwest Europe

By Anthony DiPaola

Sept 3 (Bloomberg) — Saudi Arabia, the world’s largest crude exporter, cut pricing for all October oil sales to the U.S. and Northwest Europe and reduced the premium on its main Light grade to Asia by 30 cents a barrel.

State-owned Saudi Arabian Oil Co. cut its official selling price for October sales to Asia of Arab Light crude to 10 cents a barrel more than the regional benchmark, the company said in an e-mailed statement. The discount for Medium grade crude for buyers in Asia widened 50 cents to $1.30 a barrel less than the benchmark.

Brent, a global oil benchmark, fell almost 50 percent last year as Saudi Arabia and other OPEC members chose to protect market share over cutting output to boost prices. Brent fell from over $100 a barrel in July 2014 to less than half that six months later. It traded at about $50 on Thursday.

The Organization of Petroleum Exporting Countries led by Saudi Arabia decided on June 5 to keep its production target unchanged to force higher-cost producers such as U.S. shale companies to cut back. The producer group has exceeded its target of 30 million barrels a day since May 2014.

Saudi Arabia reduced production in August to 10.5 million barrels a day, the first decline this year, according to data compiled by Bloomberg.