Euro area’s July flash PMIs to show extent of Brexit shock on currency bloc

The flash PMIs for the month of July for the euro zone would provide a likely picture regarding the effect of the Brexit shock on the currency bloc. For the June release, nearly all of the survey replies were taken prior to the announcement of the result. The manufacturing and services figures are expected to soften; however, the numbers are unlikely to drop extremely, said Societe Generale in a research note.

The services numbers for Germany are expected to have risen. The figure reflects the domestic economy and there is a scope for a recovery following the unexpected decline recorded in June. The manufacturing PMI for Germany is more influenced by events taking place outside the nation. It is likely to have dropped to 53.7 from 54.5.

In the mean time, PMIs for France have been weak for a certain period of time, in contrast with national surveys. Given the uncertainty related to Brexit, the manufacturing and services figures both are likely to be pulled down below the breakeven mark of 50, according to Societe Generale. The composite PMI is expected to be in line with the GDP growth of 0.25 percent quarter-on-quarter in the third quarter, added Societe Generale.