Eurozone Aug business activity contracts at faster pace - flash PMI

Eurozone business activity contracted at an accelerating pace in August as the region’s downturn spread further from manufacturing to services, according to PMI survey data published on Wednesday.

The S&P Global composite index flash reading fell to 47.0 from 48.6 in July, its lowest since November 2020. If pandemic months are excluded, the latest reading was the lowest since April 2013.

A mark of 50 separates contraction from expansion.

The services PMI fell to 48.3 from July's 50.9 - a 30-month low, while the manufacturing reading ticked up slightly to a two-month high of 43.7 from 42.7 the prior month.

Both manufacturing and services sectors reported falling output and new orders, albeit with the goods-producing sector registering by far the sharper rates of decline, S&P said.

“Hiring came close to stalling as companies grew more reluctant to expand capacity in the face of deteriorating demand and gloomier prospects for the year ahead, the latter sliding to the lowest seen so far this year,” it added.

“While inflationary pressures continued to run far lower than seen over much of the past two-and-a-half years, led by falling manufacturing prices, August saw headline rates of input cost and selling price inflation tick higher due in part to upward wage pressures.”

Among member states, German business activity suffered its steepest decline for more than three years as the deepening downturn in manufacturing output was coupled with more contraction in services.

“Businesses remained pessimistic towards the outlook as rising interest rates, customer uncertainty and high inflation continued to weigh on demand for goods and services. Notably, the survey showed an increase in inflationary pressures, driven by accelerated cost and price increases in the service sector,” S&P said.

The headline composite PMI Output Index remained fell for the fourth month in a row from July’s 48.5 to 44.7, the index moved deeper into sub-50 contraction territory to its lowest since May 2020.

Business activity in Germany, Europe's largest economy, contracted at the fastest pace for more than three years as a deepening downturn in manufacturing output was accompanied by a renewed contraction in services, an earlier survey showed.

Firms there remained pessimistic about the outlook as rising interest rates, customer uncertainty and high inflation continued to weigh on demand.

In France, the country's dominant services sector contracted further as falls in demand and new orders suggested there would be a contraction in the eurozone's second-biggest economy this quarter.

Reporting by Frank Prenesti for Sharecast.com