Eurozone services PMI ticks higher in August

Growth in the eurozone services sector was better than expected in August but still modest, according to data released on Wednesday.

IHS Markit's final eurozone services business activity index printed at 53.5, up from a flash reading and consensus of 53.4 and July's 53.2. This reflected an increase in new work and a sixth successive monthly fall in backlogs of unfinished business.

The services PMI for France increased to 53.4 from 53.3, while Spain also saw a jump, to 54.8 from 54.4 the previous month. The services PMI for Germany rose to 54.8 in August from a six-month low of 54.5 in July.

Meanwhile, the final composite output index for the bloc, which measures both manufacturing and services activity, printed at 51.9 compared to a flash estimate of 51.8 and July's 51.5.

Chris Williamson, chief business economist at IHS Markit, said: "The eurozone remained mired in a fragile state of weak and unbalanced growth in August.

"Although up on July, the latest reading indicates that GDP will rise by just 0.2% in the third quarter, assuming no substantial change in September. Official data available so far for the quarter suggest growth could be even weaker.

"The picture remains very mixed both by sector and country, highlighting how downside risks persist. A fierce manufacturing downturn, fuelled by deteriorating exports and most intensely felt in Germany, continues to be offset by resilient growth in the service sector, in turn propped up to a large extent by solid consumer spending in domestic markets."

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "Overall, these data continue to signal relative resilience in the domestic and non-tradable economy amid the increasingly worrying collapse in manufacturing and goods exports. Output and new business growth in services appears to have picked up a bit in Q3, while the slowdown in manufacturing has intensified.

"Markets tend not to focus on the hard services data, mainly because they’re released with a significant lag, or in the case of the monthly services output index, they are still in a trial phase. Eurostat publishes a monthly index, but it isn’t publicised, nor is there a consensus attached to it."