Goldman Sachs expects a modest rebound in June Flash PMI for the euro area and the UK

Overview

This report is Goldman Sachs' short-term preview of Europe’s June Flash PMI. The report argues that after the May flash PMI came in significantly weaker than expected, the upward revision to the final reading showed that services activity was not as weak as the flash estimate implied; entering June, easing commodity markets and financial conditions, improving consumer sentiment, and a recovery in some high-frequency indicators support a modest rebound in composite PMI in both the euro area and the UK.

Core views

The core view is that the euro area June composite Flash PMI will rise by 1.0 point from the May final reading of 48.5 to 49.5, mainly driven by services improvement, while manufacturing is broadly flat; the UK composite PMI will rise by 1.0 point to 50.7, with slight services improvement but manufacturing pulling back from a relatively high level. By country, France is expected to see the largest improvement because the negative impact from the May holiday calendar fades in June; Germany still has room for services recovery, but industrial and activity-related high-frequency data are mixed.

Analysis framework

The report combines multiple indicators including historical PMI revisions, early surveys, consumer sentiment, financial conditions, job postings, airline activity, restaurant bookings, truck mileage, the Bundesbank Weekly Activity Index, the CBI manufacturing survey, and Revolut spending data, and calibrates the final forecast across multiple statistical models and high-frequency datasets.

Methodology notes

• Macro nowcastingPMI nowcast

  Forecast the current month Flash PMI through multi-source high-frequency and survey indicators

  The report explicitly mentions optimizing across a broad range of input data and statistical models, while incorporating high-frequency data to forecast the euro area and UK June composite PMI.

• Survey data cross-validationEarly survey comparison

  Use survey signals such as sentix, ZEW, Banque de France, and CBI to validate the PMI direction

  sentix shows weaker current conditions, while ZEW points to recovering expectations; Banque de France suggests France was affected by holidays in May and may see a mechanical rebound in June; CBI manufacturing signals are weaker than the manufacturing growth implied by PMI.

• High-frequency activity trackingConsumer and activity high-frequency indicators

  Use consumer confidence, aviation, restaurant bookings, job postings, payments, and transport activity to gauge services and real activity

  High-frequency data in both Germany and the UK show mixed positives and negatives, leading the report to lower the model-implied forecast while still maintaining the view of a composite PMI rebound.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Euro area macroeconomy

  PMI is a high-frequency leading indicator of growth momentum

  Strengths

  Improvement in services and consumer sentiment, with easing financial conditions and commodity market pressures.

  Weaknesses

  Composite PMI is still expected to remain below 50, with no clear acceleration in manufacturing.

  Comparison

  Improving from the May final reading of 48.5 to 49.5, but still in contraction territory.

  Risks

  Diverging early surveys, revisions between flash and final PMI readings, and changes in price pressures may alter judgments on growth and inflation.

• UK macroeconomy

  Composite PMI reflects short-term changes in services and manufacturing conditions

  Strengths

  Consumer confidence and restaurant bookings are relatively stable, and composite PMI is expected to rise to 50.7.

  Weaknesses

  Revolut spending data are soft, and forward-looking services indicators carry downside risk.

  Comparison

  The improvement is also expected to be 1.0 point, but the manufacturing pullback limits upside.

  Risks

  Weak consumer spending or a sharper-than-expected manufacturing slowdown could weigh on PMI.

• French economic activity

  Country-level PMI is an important contributor to overall euro area improvement

  Strengths

  After the May holiday effect fades, firms expect a mechanical rebound in activity in June.

  Weaknesses

  The absolute level of surveys remains low, and the May final reading of 44.9 is still firmly in contraction territory.

  Comparison

  France is expected to post the largest improvement among the major countries.

  Risks

  If the post-holiday rebound is weaker than expected, improvement in overall euro area PMI may be constrained.

• German economic activity

  German industrial-chain and services data influence the direction of euro area PMI

  Strengths

  Services new orders are above current activity, while job postings, consumer surveys, and restaurant bookings are relatively stable.

  Weaknesses

  Truck mileage is soft, and the Bundesbank WAI continued to deteriorate rapidly in early June.

  Comparison

  Germany’s signals are more mixed than France’s; although the report lowers the model forecast, it still expects services to drive a rebound.

  Risks

  Weakness in the industrial chain and transport activity could offset the services recovery.

Key data

• Euro area June composite Flash PMI forecast49.5Expected to rise by 1.0 point versus the May final reading, slightly above market consensus.
• UK June composite PMI forecast50.7Expected to rise by 1.0 point versus May, with services improvement offset in part by a manufacturing pullback.
• France composite PMI forecast46.8Expected to improve from the May final reading of 44.9, supported by the fading negative impact of the holiday calendar.
• Euro area May composite PMI final reading48.5The flash reading was 47.5, and the final reading was revised up by 1.0 point, mainly due to an upward revision in services activity.
• France May PMI revision43.5 revised up to 44.9Historically, similar large upward revisions often signal a further increase in the following month.

Impact & implications

If the forecast materializes, it would show a marginal repair in European growth momentum in June, but the euro area composite PMI would still remain below the 50 expansion-contraction line, implying that the recovery remains mild and uneven. Services and consumer sentiment are the main supports, while manufacturing, Germany’s industry-related activity, and UK consumer spending remain drags. The price subcomponents remain worth watching, as they may reflect whether indirect effects and second-round inflation pressures persist.

Risks

• Flash and final PMI readings may see large revisions, affecting judgments on monthly business conditions.
• Weakness in German truck mileage and the Bundesbank WAI suggests actual activity may be weaker than services survey signals imply.
• Soft UK Revolut spending data may undermine services improvement.
• If services price subcomponents strengthen again, concerns about indirect effects and second-round inflation pressures may intensify.
• Early survey signals are mixed, and indicators such as sentix and ZEW do not give a fully consistent direction for June.

What to watch

• The euro area Flash PMI reading for June to be released on June 23, along with its services and manufacturing subcomponents.
• Whether improvement in UK June services PMI is enough to offset the manufacturing pullback.
• Whether France sees the post-holiday mechanical rebound expected by the report.
• Whether Germany’s industrial chain, truck mileage, and Bundesbank WAI continue to weaken.
• Whether PMI price-related subcomponents show persistent second-round inflation effects or indirect impacts.