Euro Area: Business activity slumps further in August
The HCOB Flash Eurozone Composite Purchasing Managers’ Index (PMI) fell to 47.0 in August from 48.6 in July, marking the weakest reading in 33 months. Excluding pandemic months, the reading was the worst since April 2013. Consequently, the index fell further below the 50 no-change threshold, signaling a sharper deterioration in business conditions compared to the prior month.
Output and demand fell among both manufacturing and services firms, while employment across the two sectors came close to stagnating. Lastly, business confidence remained downbeat. On the price front, in the manufacturing sector, input costs fell at a softer pace. Meanwhile, in the services sector, input prices rose more sharply. Consequently, output prices fell at a slower clip in the manufacturing sector and increased at a softer yet still-elevated rate in the services sector.
Commenting on the release, Bert Colijn, senior economist at ING, stated:
“Another weak PMI for the eurozone confirms a sluggish economy with recession as a downside risk. Inflation pressures for services remain stubborn as wage pressures continue to be a concern. The latter adds to our expectations that the ECB’s hiking cycle is not over yet.”