Eurozone businesses reported a modest but steady expansion in August, according to the latest S&P Global purchasing‑manager index (PMI) data released Thursday. While the services sector—a dominant driver of the region’s economy—saw its PMI dip to 51.6, the composite index that blends services and manufacturing remained close to its historical norm at 52.0, signalling continued growth.
Services sector eases, yet overall momentum holds
The services PMI fell slightly from 51.7 in July to 51.6 in August, a small decline from the preliminary estimate that had projected no change. Despite the dip, the reading stays well above the 50.0 threshold that separates growth from contraction. Joe Hayes, senior principal economist at S&P Global Market Intelligence, said the data “puts the euro area on track for a solid quarter of growth in Q3.” He noted that the industrial economy has regained momentum after the early‑year shock from rising energy prices linked to the Middle East conflict.
Domestic demand drives new business, export orders rebound
New business in the services sector rose solidly, driven primarily by domestic sales as overseas orders fell. Meanwhile, stronger demand for manufactured goods helped lift overall private‑sector export orders for the first time in four‑and‑a‑half years. Employment in services grew at its fastest rate in eight months, extending a positive trend that began in June, and August marked the first month of net job creation across the private sector this year.
Price pressures remain elevated
Both input‑cost and output‑price inflation in the services sector reached three‑month highs in August. In the composite PMI, input‑cost inflation edged down marginally, while output‑price growth held steady. Hayes warned that the August data showed a pause in the disinflationary trend that had been observed since May, suggesting that the European Central Bank (ECB) may feel justified in tightening policy at its upcoming meeting.
ECB likely to raise rates
Official Eurostat data released on Tuesday showed inflation in the bloc climbing back above 3% in August. As a result, ECB policymakers are expected to raise interest rates on September 10, a move aimed at curbing price pressures while supporting the modest growth indicated by the PMI figures.
Mixed performance across member states
Spain and Italy led the region’s growth in August, while Germany posted its quickest expansion since March. France, however, continued its downward slide, recording its eighth consecutive month of declining activity.
Overall, the August PMI data suggest that the eurozone’s private sector is maintaining a steady, if unspectacular, expansion trajectory despite lingering inflationary pressures and geopolitical uncertainties.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
