Eurozone services sector worsens in August with similarly weak manufacturing performance: region could contract by 0.2% in Q3

Eurozona PMIs chunguis

CdM: The eurozone’s private sector activity has deteriorated significantly during the month of August, when in addition to the fall in activity in the manufacturing sector there has also been a worsening in services, according to advance data from the Purchasing Managers’ Index (PMI) and reported by Europa Press, which suggest a contraction in the eurozone’s GDP of 0.2% in the third quarter of 2023.

Specifically, the advance estimate of the composite PMI for the eurozone stood at 47 points in August, compared with 48.6 in the previous month, its worst result in 33 months, after the deterioration in the manufacturing sector, with a PMI reading of 43.7 points, compared with 42.7 in July, was added to a services PMI of 48.3 points from 50.9 in the previous month, its worst figure in 30 months.

The downward pressure on the eurozone economy in August came mainly from the German services sector, while in the manufacturing sector, German firms are also reducing their output.

Thus, eurozone firms virtually halted hiring in August as a result of deteriorating demand and a more pessimistic outlook for the next twelve months, with future expectations falling to their lowest level so far this year.

Moreover, while inflationary pressures remained well below the level observed for much of the past two and a half years, driven by falling prices in the manufacturing sector, cost and price index inflation rates rose, partly due to upward pressures on wage costs.

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