Business activity in the eurozone fell in August

Business activity in the eurozone decreased in August, reflecting a renewed decline in industry and the first drop in the services sector since the end of last year, a preliminary survey by S&P Global showed on Wednesday.

The preliminary composite Purchasing Managers’ Index (PMI) in the eurozone’s private sector fell by 1.6 points in August compared to July, dropping to 47 points, the lowest level since November 2020, reported Hamburg Commercial Bank (HCOB), which compiles the report for S&P Global.

A PMI below 50 signals a decline in activity, while higher values indicate growth. Excluding the months during the pandemic, the index is at its lowest level since April 2013.

Activity has fallen for the third consecutive month, led by the fifth consecutive monthly decline in the manufacturing sector, which was somewhat milder in August. In the services sector, activity fell for the first time since December last year, but significantly less compared to the goods manufacturing sector, the report noted.

In Germany, the largest economy in the eurozone, business activity decreased in August at the fastest pace in over three years. HCOB’s preliminary composite PMI, compiled by S&P Global, fell from July’s 48.5 points to 44.7 points in August, the lowest level since May 2020.

Business activity in the services sector decreased for the first time since December last year. The corresponding index fell from July’s 52.3 points to 47.3 points in August, the lowest level in nine months.

The PMI for the manufacturing sector rose by 0.3 points to 39.1 points in August, but remained deep in the contraction zone, the survey showed.

Increased inflationary pressures

– Any hope that the services sector could save the German economy has faded. Instead, the services sector will join the recession in manufacturing, which seems to have started in the second quarter – said Cyrus de la Rubia, chief economist at HCOB.

Businesses remained pessimistic about the outlook as rising interest rates, customer uncertainty, and high inflation continue to impact demand for goods and services, the survey showed.

There has been an increase in inflationary pressures, driven by accelerated growth in costs and prices in the services sector.

– It seems that service companies feel surprisingly bold in raising prices even faster – said de la Rubia.

The private sector in France, the second-largest economy in the eurozone, also remained in the contraction zone in August, preliminary data from S&P Global showed.

The overall preliminary PMI in August stagnated compared to July, remaining at 46.6 points, the lowest level in 32 months, indicating a solid decline in the private sector. Activity in the services sector decreased for the third consecutive month, while manufacturing remained in a contraction phase that has lasted since last summer.

The PMI index in the services sector fell to a 30-month low of 46.7 points in August, down from 47.1 points in the previous month. The manufacturing PMI, however, increased to a five-month high of 46.4 points in August, up from 45.1 points in July.

– The French economy is stuck in a rut, once again showing signs of distress – said Norman Liebke, an economist at HOCB.