Does One Swallow Make a Summer?

Research evidence excerpt

Does One Swallow Make a Summer?

UpdateM

PMIs Manufacturing | Solid across the board: On the month, headline

manufacturing PMIs showed some heterogeneity across Europe: they increased in

Germany, decreased in France (mostly because of shorter delivery times though)

and were broadly stable in the rest of EA ( Exhibit 4 ). Looking through this monthly

volatility, the key takeaway is however that they remain solid, at 52.0 in the EA from

51.4 in June. We also note that the uptick in the EA headline figure this month

reflects improvement in all components – orders, output, inventories and

employment. And the trend improvement since 2024-25 is striking: it seems more

and more convincing that EA exporters are benefiting from the global capex cycle

(AI, Defence etc.).

Exhibit 4: Manufacturing PMIs Exhibit 5: Most EA subcomponents

remained solid across Europe improved this month

Euro Area Manufacturing PMIs Contributions to the change in headline

54 Manufacturing PMI

2.4

52 2.0

1.6

50 1.2

0.8

0.4

48 0.0

-0.4

46 -0.8

-1.2

44 Euro area -1.6

Germany Euro area Germany France Rest of EA

42 France Output (25%) New Orders (30%)

Rest of EA Employment (20%) Delivery times (15%)

40 Stock of purchases (10%) Headline Manufacturing

Jan-24 May-24 Sep-24 Jan-25 May-25 Sep-25 Jan-26 May-26

Source: S&P Global, Morgan Stanley Research estimates

Source: S&P Global, Morgan Stanley Research

Manufacturing delivery times remain elevated: From an inflation perspective,

supply bottlenecks contributed significantly to the 2022-23 inflation push (see for

instance the Blanchard-Bernanke model here) and this is a key factor the ECB

monitors when assessing risks to inflation (see Lane's speech here). Delivery times

remained elevated compared to Feb-26, albeit much lower than in 2022-23 ( Exhibit