Manufacturing PMIs (Aug.) - Capital Economics
Nordic & Swiss Economics

Manufacturing PMIs (Aug.)

Nordic & Swiss Data Response
Written by David Oxley
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The positive set of August manufacturing PMIs from Switzerland and the Nordics suggests that the recovery in industrial activity continued over the summer. While the fortunes of industry depend in large part on conditions elsewhere in Europe, signs of increasing order books bode well for the near term.

Signs of rising manufacturing backlogs bode well for the near term

  • The positive set of August manufacturing PMIs from Switzerland and the Nordics suggests that the recovery in industrial activity continued over the summer. While the fortunes of industry depend in large part on conditions elsewhere in Europe, signs of increasing order books bode well for the near term.
  • The increase in the Swiss manufacturing PMI in August, from 49.2 in July to 51.8, lifted it above the 50-mark for the first time since March 2019 and left it broadly in line with that in Germany. (See Chart 1.) The fact that the output and new orders component are now both back in expansionary territory raises hopes that the multi-speed recovery in manufacturing, which has seen pharmaceutical production run ahead of that in traditional sectors (see here), has begun to broaden. Given that the services PMI also edged up (see Chart 2), and the KOF surged in August too, the Swiss economy appears set to rebound in Q3.
  • Elsewhere, the rise in the Swedish manufacturing PMI, from an upwardly-revised 51.4 in July to a 21-month high of 53.4, was driven by yet another rise in the orders component. It was encouraging that firms’ expectations for production over the next six months also surged from July. While the relationship between the PMIs broke down in Q2, the economy also looks set for a bounce back in Q3.
  • Finally, while the Norwegian economy has weathered Covid comparatively well, the fact that the manufacturing PMI remained below the 50-mark in August (46.1) suggests that output and investment cuts in the energy sector have weighed on activity in the industrial sector. The series has tended to provide a six-month lead on year-on-year GDP growth in the past, but the relationship understandably broke down during Covid. Nonetheless, it currently points to modestly negative annual GDP growth in H2 (see Chart 4), which is broadly in line with our forecasts.

Chart 1: Manufacturing PMIs

Chart 2: Switzerland PMIs

Chart 3: Sweden PMIs & GDP

Chart 4: Norway PMI & Mainland GDP

Sources: Refinitiv, Markit, Capital Economics


David Oxley, Senior Europe Economist, david.oxley@capitaleconomics.com