Japan and EMU reported mixed PMI readings - BBH

Japan and EMU have reported preliminary PMI readings for August and it was a mixed result, points out the analysis team at BBH. 

Key Quotes

“Japan's manufacturing PMI rose to 52.8 from 52.1 in July.   Last year it averaged 50.0. This year's average is 52.7.  It is also the average for Q2. Similar to many other high income countries, the pressing challenge for Japan is not growth but prices.  Before the weekend Japan reports July CPI.  The core rate (excluding fresh food) stood at 0.4% in June and may have ticked up to 0.5% in July.”

“In Europe, the weakness in services was offset by the strength of manufacturing, leaving the composite virtually unchanged at 55.8 (vs. 55.7). The manufacturing reading rose to 57.4 from 56.6.  This matches the cyclical high seen in June.  The service reading, which covers a larger part of the economy slipped to 54.9 from 55.4.  The index peaked in April at 56.4.”

“There are three takeaways from the EMU PMI.  First, the economy continues to operate at a strong level, but the momentum has moderated.  Second, price components suggest that the pullback in inflation since February may be coming to an end.  Third, the euro's appreciation has so far not undermined export orders,  where the sub-index rose to its best level in six years.”

“This, in turn, may have some bearing on how to understand the level of concern among the ECB regarding the euro's strength.  We think the concern is still very mild.  It also may impact the bias going into Jackson Hole.  In his speech earlier today, Draghi defended the effectiveness of its asset purchase program.”