FLASH PMIs

Eurozone: Eurozone new orders increase for first time in 15 months

The seasonally adjusted HCOB Flash Eurozone Composite PMI Output Index, based on approximately 85% of usual survey responses and compiled by S&P Global, improved for the third month running in August, posting 51.1 from 50.9 in July. The modest increase in business activity was the sharpest since May 2024. Output has now risen in each of the past eight months.

The stronger expansion in output midway through the third quarter of the year was driven by the manufacturing sector, where production increased at a solid pace that was the fastest in almost three-and-a-half years. Meanwhile, services business activity rose for the third month running, albeit only slightly and to a smaller degree than was the case in July.

The euro area’s largest economy – Germany – posted a third successive monthly increase in output during August on the back of a solid expansion in manufacturing production. Although the pace of expansion in overall business activity remained slight amid muted service sector performance, the latest rise was the fastest since March. Meanwhile, activity in France neared stabilisation, with the marginal fall in output the softest for a year. The rest of the Eurozone continued to register increasing output, albeit with the pace of growth easing slightly from July.

New orders returned to growth in August, thereby ending a 14-month sequence of decline. New business increased slightly, with renewed expansions seen in both the manufacturing and services sectors. In fact, the rise in manufacturing new orders was the first since April 2022. Growth in total new business was recorded in spite of a further reduction in new export orders (which include intra-Eurozone trade). New business from abroad has decreased continuously on a monthly basis since March 2022, with the latest fall the sharpest in five months.

Eurozone companies continued to take on additional staff in August, extending the current sequence of job creation to six months. The latest rise in employment was still only modest, but quickened to the fastest since June 2024. The overall increase in staffing levels was centred on the services sector as manufacturing employment continued to decrease. France posted a renewed rise in employment in August, but workforce numbers in Germany fell slightly. Meanwhile, staffing levels increased modestly across the rest of the euro area.

The hiring of additional staff meant that companies were able to keep on top of workloads despite the renewed increase in new business. As such, backlogs of work continued to fall in August, extending the period of depletion which began in April 2023. The latest fall was also slightly sharper than that seen in July.

Inflationary pressures picked up in August, with both input costs and output prices increasing at faster rates than in July. Input prices rose sharply, and at the steepest pace in five months. That said, the pace of inflation remained softer than the series average. Manufacturing input costs increased for the first time in five months, albeit marginally. Meanwhile, the latest sharp increase in services input prices was the most pronounced since March.

The pass through of higher input costs to customers meant that output prices increased again in August. The pace of inflation quickened fractionally and was the fastest in four months. Sharper rises in charges were signalled in Germany and France, but the rest of the Eurozone posted the slowest increase in output prices in the year-to-date. (…)

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Things are getting better. Economic activity has picked up in both manufacturing and services. Overall, we’ve seen a slight acceleration in growth over the past three months. Despite headwinds like U.S. tariffs and general uncertainty, businesses across the eurozone seem to be coping reasonably well. The EU Single Market is likely playing a helpful role here, especially since most export and tourism revenues are generated within the EU.

The European Central Bank might wince a little at the rising cost pressures in the services sector. After all, it’s banking on slower wage growth to help bring inflation down in this crucial part of the economy. That said, there’s a bit of relief in the fact that inflation in service-sector selling prices has remained more or less steady.

Manufacturing output has increased for six straight months, with Germany leading the charge. France, which had been a drag in June and July, showed signs of stabilising in August. The same goes for services: France’s recession seems to be tapering off, while Germany is showing growth even if only marginal.

U.S. trade policy is leaving its mark. Foreign orders in the eurozone manufacturing sector have declined for the second month in a row. Germany had been holding up well, possibly due to pre-emptive purchases from the U.S., but now it’s also seeing a drop in orders. France has climbed out of the deep hole of falling foreign demand over the last months, but incoming orders are still on the decline.”

Japan: Overall business activity expands at quickest pace in six months

The headline seasonally adjusted S&P Global Flash Japan PMI Composite Output Index increased from 51.6 in July to 51.9 in August and pointed to an increase in total private sector activity for the fifth successive month. Though modest, the rate of expansion was the best recorded since February.

Underlying data indicated that the upturn was broad-based by sector and led by the service industry. Manufacturing production increased slightly for the second time in three months, albeit marginally, while services companies recorded a softer, but still solid rate of activity growth. Higher output was generally linked to improved client demand and increased amounts of new work.

At the composite level, new business expanded at a modest pace that was the steepest in six months. This was solely driven by the service sector, however, as new work fell across manufacturing companies (albeit at a slower rate than in July). Foreign demand for Japanese goods and services meanwhile declined for the fifth month in a row, with both factories and service providers noting a solid drop in new export work.

Average input prices faced by private sector firms in Japan increased at a sharp and accelerated rate in August. That said, the rate of growth remained softer than the average seen over the first half of 2025. Sector data highlighted that services companies continued to register a steeper pace of cost inflation than manufacturers. Firms attributed higher operating expenses to a variety of factors, most notably greater prices for raw materials, labour, fuel and transport.

Although businesses across Japan reported stronger cost pressures, the rate of selling price inflation eased for the second straight month in August. Though solid, the latest increase in output charges was the least pronounced since October 2024. There were reports that firms’ pricing power was limited due to increased market competition.

Companies maintained a cautious approach to employment, with staffing levels rising only slightly again in August. At the same time, there were signs of capacity pressures building across the private sector, with overall backlogs of work rising at a faster pace. Though marginal, the latest increase in unfinished workloads was the quickest since June 2023.

Finally, when assessing the one-year outlook for output, Japanese companies were generally upbeat in August. The level of optimism was strong and slightly above that seen in July. However, overall sentiment remained below the survey’s long-run average.

More U.S. Companies Plan to Slow Hiring in Second Half of 2025 Twice as many employers as last year say they are planning to pull back on filling jobs, according to new Conference Board survey

One in five U.S. employers surveyed by the Conference Board plans to slow hiring in the second half of 2025, nearly double the rate of companies that anticipated bringing on fewer people at this time last year.

The latest report from the research group, which has more than 1,000 public and private corporations as members, marks the second year in a row that many chief human resource officers polled were planning on fewer new hires. The last time executives were broadly optimistic about hiring was the second quarter of 2023, when more than half expected to increase head count, according to past Conference Board surveys.

Since then, optimism has steadily declined. (…)

The survey of 100 chief human-resource officers includes U.S. organizations from Fortune 500 companies and large global brands as well as midsize regional employers and health systems that employ thousands of people. (…)

It now takes the average worker 24 weeks to find a job after losing one, nearly a month longer than a year ago, according to federal data. The July jobs report showed hiring slowing sharply. The number of long-term unemployed has been rising. (…)

Half of those surveyed also said they expected the Trump administration’s policies to have a negative impact on the workforce, up from 36% who said the same thing in March. Meanwhile, 11% said administration policies would have a positive impact, up from 5% in March. Only 18% were uncertain, down from 31% in the spring.

Fed Minutes Reveal Broad Support for Holding Rates Steady Last Month ‘Almost all’ officials backed July’s interest-rate decision, even though two governors backed a rate cut

(…) The written account of the meeting, released with a customary three-week lag, suggested officials were divided over when they could be confident that higher import costs wouldn’t lead to a period of broader, rolling price hikes. Some officials said “a great deal could be learned in coming months” though others said “it would not be feasible or appropriate to wait for complete clarity on the tariffs’ effects on inflation before adjusting the stance of monetary policy.”

While officials worried over the prospect of weaker employment at the meeting, a majority of them said the chance of higher inflation was “the greater of these two risks.”

Since that meeting, economic data have strengthened the argument of so-called doves who favor rate cuts because job growth in May and June was revised lower. Competing interpretations of economic data have splintered rate-setters in the ensuing weeks.

Governors Christopher Waller and Michelle Bowman, who last month dissented in favor of a cut, have argued that officials shouldn’t react to price increases from tariffs, because those aren’t likely to be repeated.

A handful of officials have lined up with Waller and Bowman indicating they could favor cutting rates at the Fed’s next meeting, Sept. 16-17. They have suggested that a slower-than-expected pass-through of tariff hikes to consumer prices should quiet worries about higher import costs creating a new inflation shock.

But inflation-focused hawks have pointed to firmer price pressures since last month’s meeting, including for services. Kansas City Fed President Jeff Schmid said in a speech last week that tariff effects on inflation had been limited in part because the Fed had held steady. (…)

Christmas Decorations Come With Higher Price Tag This Holiday Season Thanks to Tariffs

The vast majority of artificial Christmas trees, lights and other decor are imported — mostly from China. Because seasonal items typically need to be shipped months ahead of time, stiffer levies already added millions of dollars in unexpected costs.

Jared Hendricks, founder and chief executive officer of Village Lighting Company in West Valley City, Utah, had to take a line of credit leveraged by his house and office to help cover the $1.5 million in extra tariff costs.

“This is the most stressful year I’ve ever had,” said Hendricks (…).

For shoppers this holiday season, the shipping disruptions will mean less choice of products in the stores and prices that could be 10% to 20% higher than last year as a result of tariffs, said Jami Warner, executive director of the American Christmas Tree Association. An artificial tree that cost $299 in 2024, say, could fetch as much as $359 this year. (…)

Craig Batten, president of S4 Lights in Toano, Virginia, said he has explored making Christmas lights in the US but “found that that was about impossible.” The only place to get many raw materials is in China and Southeast Asia, and finding enough workers here is a problem, he said.

Batten added a line item to his invoices called “tariff impact,” but he can’t pass along the entire cost of the duties because that would raise prices too high. (…)

Terlep scurried to get 11 containers carrying about 700 sets each shipped so they would land in the US before the initial Aug. 12 deadline. He’s decided to eat the tens of thousands of dollars in additional cost from tariffs.

“Everyone is hoping against hope that somehow or another sanity is going to emerge out of this because it is unsustainable,” Terlep said.

At Balsam Hill, one of the leading companies in the holiday-decorations business, the tariffs bill is expected to come to about $15 million this year — up from $1 million last year, according to Mac Harman, founder and CEO of parent company Balsam Brands.

To preserve cash to pay tariffs, the California-based firm scaled back orders, cut 10% of its global workforce of 350 employees, and froze raises and travel. But none of those actions come close to covering the cost of the tariffs, Harman said.

The Christmas Trade Group, which represents small and medium decorations firms, has requested a tariff exemption from the Trump administration. The group argues that domestic production is impossible, decorations are critical to holiday retail sales and that tariffs effectively force businesses to choose between operating at a loss and closing. (…)

Business Inflation Expectations Unchanged at 2.3 Percent

German Wage Growth Quickened Sharply in Second Quarter

Negotiated pay rose 5.7% from a year ago, compared with just 0.9% in the previous three months, the central bank said Thursday in its monthly report.

This was mainly due to higher permanent increases in the retail and wholesale sectors as well as in public services, the Bundesbank said. Excluding the effects from special payments for inflation compensation, wages rose 6.7% in the second quarter — matching the previous period.

At the same time, the central bank highlighted that recent collective-bargaining agreements show less pronounced wage increases and that new contracts by year-end are expected to be lower than last year “due to declining inflation rates and the weak economic environment.”

A gauge for negotiated wages in the euro zone, to be published Friday, will be closely watched by European Central Bank officials weighing next steps on interest rates. (…)

About 80% of Canadians Say Trump Won’t Honor a Trade Deal, Poll Finds

(…) Trump signed off on the new US-Mexico-Canada Agreement during his first term in office, hailing it as the “largest, fairest, most balanced and modern trade agreement ever achieved.” Since returning to power in January, he has nevertheless imposed tariffs on steel, aluminum, automobiles and other products from Mexico and Canada. (…)

Excluding energy products, the US has a trade surplus with Canada. (…)

US Housing Starts Rise to Five-Month High, Led by Multifamily

New residential construction increased 5.2% last month to an annualized rate of 1.43 million homes, according to government figures released Tuesday. That was above all forecasts in a Bloomberg survey of economists.

Multifamily starts, which tend to be volatile, increased nearly 10% to the strongest pace since mid-2023. Starts of single-family homes, which make up the largest share of home construction, rose 2.8% in July to an annualized 939,000. (…)

The number of one-family homes under construction fell in July to the slowest pace since February 2021, the report showed. Builders have signaled a slowdown in spec homes in particular, or those built without a signed contract. (…)

Building permits, an indicator of future construction, decreased 2.8% to an annual rate of 1.35 million — the weakest since June 2020. Single-family authorizations climbed for the first time since February. Permits for new multifamily projects declined. (…)

Permits Tell the Real Story

 

Source: NAHB and Wells Fargo Economics

Small business hiring fell for the third consecutive month

Using Bank of America small business payments to hiring firms data, in July, small business hiring was down 6.7% year-over-year (YoY) on a three-month moving average (Exhibit 2). This was the third consecutive monthly decline.

Based on an estimate before Trump’s duties took effect on August 7, the combined annual tariff impact to US small businesses is $202 billion, which works out to about $856,000 per firm each year, according to the US Chamber of Commerce.

Using Bank of America internal data, we examined payments to US Customs and Border Protection (CBP) to better understand the impact of these levies. In July, tariff payments to the CBP per small business client surged 170% compared to January 2025 (Exhibit 3). It’s important to note this data is limited in that only a small subset of Bank of America small business customers make direct tariff payments to CBP, given many do not have substantial international exposure, while others rely on customs brokers.

These tariff payments may be negatively impacting profitability for some small firms. Although, small business profitability, as proxied by the ratio of payments into small business accounts compared to the outflow, continues to rise. It was up 0.5% YoY in July, on a three-month moving average, but has been decelerating since the end of last year (Exhibit 4). Plus, according to the NFIB, the percentage of small business owners reporting poor sales as their top business problem rose one point to 11% in July – the highest level of reported poor sales since February 2021.

 

Wage Trends

Notably, even as hiring fell in services as well as retail and wholesale, payroll growth improved in July from both Q1 and Q2 across all sectors. That indicates wage inflation is driving up costs for these businesses, especially in services, according to the BLS, as companies are being forced to pay more for new hires.

Bank of America small business account data supports this – with leisure and hospitality sectors such as restaurants and lodging as acute examples. Starting in Q2, their payroll growth per small business client began to outpace overall median wage growth. It’s possible health and education services are also facing similar issues, whereas finance’s wage growth is likely due to a continuation of robust spending and pay increases among higher-income households.

Canada’s inflation rate slows to 1.7% in July, raising odds of BoC rate cut

Statistics Canada’s consumer price index report on Tuesday said the deceleration from 1.9 per cent in June was led by a decline in gasoline prices, reflecting the removal of the consumer carbon price in the spring.

Meanwhile, grocery prices rose at a faster pace of 3.4 per cent annually. Shelter costs increased by 3 per cent from a year ago, fuelled by a 5.1-per-cent rise in rent and a more modest decline in residential natural gas prices compared with June.

Financial markets reacted to the latest inflation data by increasing the odds of an interest rate cut in September to 36 per cent from 26 per cent the day before, according to data from Bloomberg.

Economists also responded positively to the report, noting that the slowdown could lead to an interest rate cut later this year. (…)

Modelling by the Bank of Canada suggests that if the tariff situation doesn’t change by much, Canada will likely avoid a recession and inflation will remain around the 2-per-cent target. (…)

To gauge underlying price pressures, the Bank of Canada keeps a close eye on its preferred core measures of inflation, which did not ease in July, continuing to hover around 3 per cent annually.

However, BMO chief economist Douglas Porter noted that the three-month annualized trend for those measures eased to 2.4 per cent in July. (…)

The central bank’s next interest rate announcement is scheduled for Sept. 17.

India’s State-Run Refiners Ramp Up Russian Oil Buying Despite US Criticism

India’s state-run refiners have returned to buying Russian oil after a brief pause, despite the South Asian nation facing higher tariffs for the trade and a volley of criticism from Trump officials. (…)

Trump has threatened to raise the levies on all Indian imports to the US to 50% on Aug. 27, half of which would be due to purchases of Russian oil.

(…) the discount for Urals — Russia’s flagship crude that’s shipped from its western ports — has deepened to $2.50 a barrel to Dated Brent, up from $1 in July, according to traders. That’s likely provided added incentive for India’s oil refiners to return to buying the grade, they added.

Europe Should Deepen Ties With Non-U.S. Trade Partners, Lagarde Says

“While the U.S. is—and will remain—an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy,” Lagarde told a panel at the World Economic Forum in Geneva on Wednesday.

Lagarde has previously spoken about how the European Union should bolster its institutions and economic resilience as a way to increase international prominence of the euro currency after the U.S. began to raise tariffs on its trade partners.

The deal between the U.S. and EU places an effective average tariff between 12% and 16% for U.S. imports of eurozone goods, she noted. The baseline tariff agreed to by the European Commission and Trump administration, which affects most goods, is 15%. (…)

U.S. Allies Still Waiting for Tariff Relief on Autos and Steel Hastily drafted trade accords leave questions about who promised what

In return for billions of dollars of investment pledges and promises to buy more American goods, U.S. allies in Asia and Europe say President Trump agreed to lower tariffs on key exports such as cars and steel.

Weeks later, they are still waiting. (…)

Even the U.K., which was the first country to agree to a new trade pact with Trump back in May, is still waiting for a reduction in steep tariffs on steel. The two sides are thrashing out final terms on exactly which U.K. steel exports will qualify.

A U.S. administration official said the U.S. agreed to discuss and possibly adjust these so-called Section 232 tariffs but said the administration didn’t make a firm commitment to change them as part of these initial agreements. (…)

Commerce Secretary Howard Lutnick said in an interview on CNBC on Tuesday that documents with deal terms for countries including Japan and South Korea are “weeks away,” but that investors shouldn’t expect “250-page trading agreements.” (…)

Almost as soon as some of these pacts were announced, cracks in what exactly they entailed started to show.

Following a deal with Seoul, the White House announced that South Korea would provide “historic market access to American goods like autos and rice.” Yet Finance Minister Koo Yun-cheol, one of South Korea’s top trade negotiators, told reporters when he returned home that he didn’t discuss rice with the U.S. team at all.

An administration official said White House announcements have laid out what trading partners have agreed to and “we expect them to abide by these commitments.”

Investment pledges have proved especially controversial, with U.S. allies pushing back on Trump’s insistence that he will have considerable discretion over how those funds are invested.

For instance, a $350 billion investment fund that was the cornerstone of the pact with South Korea, of which $150 billion is earmarked for cooperation in shipbuilding, would be “owned and controlled by the United States, and selected by myself, as president,” Trump said.

Kim Yong-beom, South Korea’s presidential chief of staff for policy, said that the fund “is not a structure where the U.S. unilaterally decides,” and that South Korea will also require the investment projects proposed by the U.S. to be “commercially meaningful.”

Japan’s top tariff negotiator, Ryosei Akazawa, flew back to Washington only days after striking Japan’s trade deal. In meetings with Trump officials, he protested that a July 31 White House executive order seemed to “stack” a new levy of 15% on top of any pre-existing tariffs on U.S. imports from Japan. He had told Japanese lawmakers the 15% wouldn’t be piled on top. He ultimately returned with a commitment from U.S. officials, he said, to revise the order.

The U.S. has agreed not to stack the new tariffs for Japan, an administration official said, though the official added that this wasn’t part of the deal Japan had initially negotiated.

The EU is also waiting for relief on auto tariffs and is negotiating improved terms for steel producers.

Asked about the vehicle tariffs recently, an EU spokesman said, “The U.S. has made political commitments to us in this respect and we look forward to them being implemented.”

US Soybean Farmers Near ‘Financial Precipice’ Due to Tariffs

US soybean farmers are near a “trade and financial precipice” and cannot survive a prolonged trade war with China.

That’s the warning from Caleb Ragland, president of the American Soybean Association. In a letter to President Donald Trump dated Tuesday, he urged the administration to reach a deal with China to remove duties and, if possible, include significant soybean purchases.

“US soybean farmers cannot survive a prolonged trade dispute with our largest customer,” he said. “Soybean farmers are under extreme financial stress. Prices continue to drop and at the same time our farmers are paying significantly more for inputs and equipment.”

In an email statement to Bloomberg News, the White House said the president cares about farmers. (…)

China hasn’t purchased a single cargo of soybeans from the next harvest, which starts in September. In typical years, the Asian nation ordered an average of 14% of its estimated purchases from the US before crop gathering began, according to an analysis by the group, provided to the administration together with the letter.

US sales to other countries haven’t been able to make up the difference, Ragland said, adding that tariffs are making US supplies less competitive than those from rival Brazil. (…)

Kenya in Talks With China to Convert Dollar Loans Into Yuan Debt

Kenya is in talks with China to convert dollar-denominated debt the East African nation owes its biggest bilateral lender to yuan and extend the repayment period, Treasury Secretary John Mbadi said.

The negotiations are aimed at helping reduce the $1 billion Kenya spends annually on servicing its debt to China, and to create more wiggle room in its budget, he said in an interview in the capital, Nairobi, on Wednesday. The discussions are expected to conclude soon, Mbadi said, without providing a more specific timeframe.

“The moment we move from US dollar to renminbi, automatically, the interest rate reduces by almost half,” while adjusting the tenor of the loan would also benefit the country, the minister said. “To us, that is a big saving.” (…)

Trump Administration to Screen Immigrants for ‘Anti-American’ Views 

The Trump administration plans to scrutinize social media for “anti-American ideologies” when deciding to grant visa or green-card applications.

U.S. Citizenship and Immigration Services, the primary agency in charge of legal immigration, said Tuesday that its officers should give significant weight to evidence that an immigrant “has any involvement in anti-American or terrorist organizations” when reviewing residency, work and visa applications. 

When it comes to what registers as anti-American ideology, the updated guidance points to a provision of immigration law dating back to the Cold War that prohibits immigrants from becoming U.S. citizens if they are members of communist or anarchist organizations. It doesn’t specify the range of speech the administration would categorize as anti-American.

The Department of Homeland Security said Tuesday that it would no longer turn a blind eye to those who seek to live and work in the U.S. but criticize its policies. (…)

The latest directive builds on the agency’s April announcement that it would screen immigrants’ social media for evidence of antisemitism. As part of that shift, many immigrants, including those applying for tourist or student visas to the U.S., must now submit their social-media handles and make their profiles public for officers to review.

It is another step in the Trump administration’s goal of not only reducing overall immigration levels, but also in shaping the types of immigrants permitted to come to the country. The administration has also used allegations of anti-American and antisemitic activity against students who have participated in pro-Palestine protests.

The administration also tightened citizenship standards last week in a separate policy memorandum that said applicants will need to prove “good moral character.” That includes contributing to the community, having a good education, holding down a job and paying taxes on time, according to Homeland Security.

Will Trump provide the definition of “good moral character”?

Behind the Curtain: Influencing Trump There’s a clear map for swaying President Trump — and it goes far beyond the cartoonish commentary that flattery and gifts are the surest ways.