If we want to have a representation of the new Euro Area dynamics the chart below is the good one.
It represents the synthetic indices of the PMI/Markit surveys in August. Each index is a weighted average of the manufacturing index and of the non manufacturing index. All converge to 50 or above. The main point is the contrast between the dispersion in a recent past to the current common trend.
Dispersion means that every country is going on its own way. This implies trajectories that are not necessarily consistent within the Euro Area. Common trend means that all follow the same path. Since last spring this is the main change seen in the Euro Area but it’s an important one as it is a necessary condition for growth at this moment of the business cycle. Trade and links between countries within the Euro Area are very dense: this means spillover effects and rapid improvement.
Reasons of the change have to be found on severe adjustments made in companies to regain some margin in a weak growth environment (cost cutting, improvement in companies’ organization) and a reduction of uncertainty at the Euro Area level.
There is still a lot to do to have a strong and sustainable recovery. At this moment of the business cycle the implicit coordination is the best news we could expect. After all has to be done to see a stronger investment momentum in order to improve productivity gains and to create a more autonomous growth dynamics.