Eurozone Business Growth Remains Steady in August, PMI Survey Reveals
Eurozone Services and Private Sector Performance in August
LONDON, Sept 3 (Reuters) - Growth in the euro zone's dominant services industry slipped to a two-month low in August though solid and broad-based demand kept overall private sector activity on an even keel, a survey showed on Thursday.
PMI Survey Results and Analysis
The S&P Global Eurozone Services PMI eased slightly to 51.6 in August from 51.7, a tad lower than a preliminary estimate for no change from last month.
The composite index, which combines services and manufacturing, remained close to its long-run average of 52.3, coming in at 52.0 and suggesting the bloc's private sector is expanding at a steady, if unspectacular, pace.
A reading above 50.0 indicates growth.
Expert Commentary
"August's PMI data puts the euro area on track for a solid quarter of growth in Q3. Momentum in the industrial economy has picked up nicely and the service sector has shaken off the initial weakness seen after energy prices surged at the start of the Middle East war," said Joe Hayes, senior principal economist at S&P Global Market Intelligence.
Demand, Employment, and Exports
New business in the services industry — a key gauge of demand — rose solidly again in August, though the gain was driven by domestic sales as overseas orders fell. Still, stronger demand for manufactured goods meant overall private sector export orders rose for the first time in four-and-a-half years.
Employment Trends
Services employment grew at its fastest pace in eight months, extending a positive trend in place since June. Across the private sector as a whole, August marked the first month of net job creation this year.
Price Pressures and Inflation
On prices, services sector input costs and output charges both climbed to three-month highs in August. In the composite PMI, input cost inflation edged down fractionally while output price growth was unchanged. Price pressures remain elevated by historical standards and above the levels seen before the outbreak of the U.S.-Israeli war with Iran.
Disinflationary Trends and ECB Outlook
"It's noteworthy that the August data indicated a stalling of the disinflationary trend witnessed since the PMI prices indices peaked in May. Taken alongside the resilience in economic activity as illustrated by the latest figures, the European Central Bank may feel a tightening of policy at next week's meeting is now justified," Hayes added.
Interest Rate Expectations
Inflation in the bloc rose back above 3% last month, official data showed on Tuesday, and ECB policymakers are expected to raise interest rates on September 10.
Country-Specific Performance
Spain and Italy led growth across the euro zone, while Germany posted its quickest expansion since March. France, however, bucked the regional trend, recording its eighth consecutive month of declining activity.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
