Euro Area: Private-sector activity cools in August

Euro Area PMI August 2020

Euro Area: Private-sector activity cools in August

The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, pointed to a slowdown in growth momentum in August. The index declined to 51.6 in August from 54.9 in July, which had marked the strongest reading since June 2018. Despite the drop, the PMI remained above the 50-threshold that distinguishes expanding from contracting business activity in the Eurozone.

Although the services sector saw activity wane, manufacturing production picked up, with growth hitting an over two-year high. That said, new orders growth eased, particularly those stemming from abroad, hitting service providers the most due to the reintroduction of travel restrictions. Amid still-muted demand and business confidence softening from July, firms cut jobs for the sixth consecutive month, being particularly acute in the manufacturing sector. On the price front, although input cost inflation rose for the third month running, firms lowered selling prices amid the lack of pricing power in a subdued demand backdrop.

Assessing the Eurozone’s two largest economies, Germany saw solid, albeit slightly slower, growth in August as did France but the expansion moderated at a more pronounced rate there. Meanwhile, output decreased in the rest of the region.

Commenting on the release, Chris Williamson, chief business economist at IHS Markit, said:

“The eurozone stands at a crossroads, with growth either set to pick back up in coming months or continue to falter following the initial post-lockdown rebound. The path taken will likely depend in large part on how successfully COVID-19 can be suppressed and whether companies and their customers alike can gain the confidence necessary to support growth.”

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