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. (…)