The recovery of the eurozone’s private sector economy lost momentum in August - IHS Markit

According to the report from IHS Markit, the recovery of the eurozone’s private sector economy lost momentum in August as growth eased markedly on July’s recent peak. After accounting for seasonal factors, the Eurozone PMI Composite Output Index fell to 51.9, down from 54.9 in the previous month. The index was, however, higher than the earlier flash reading (51.6) and represented moderate growth in activity. There was a divergence in performance in activity by sector during August. Manufacturing output rose markedly and at the fastest pace since April 2018. Although service sector activity also rose for a second month in succession, the rate of growth eased sharply and was only marginal. Underpinned by a strong performance in its manufacturing sector, Germany was the best performing country during August, although overall growth was a little softer than the previous month.

Levels of new business increased for a second successive month during August, although growth was modest and weaker than in July. New export sales were reported to have fallen again, extending the current period of contraction to nearly two years.  With activity rising at a slightly firmer rate than new business, private sector companies were comfortably able to keep on top of workloads. Latest data showed an eighteenth successive monthly fall in backlogs of work, although August’s contraction was only modest. Companies subsequently again made cuts to employment numbers in August, extending the current period of contraction to six months. 

Looking to the year ahead, business confidence remained in positive territory. Sentiment about the next 12 months was however slightly down compared to July.

The Eurozone PMI Services Business Activity Index recorded a notably slower rate of growth during August. After accounting for seasonal factors, the index declined to 50.5, from 54.7 in July. A marked slowdown of growth in France, plus returns to contraction in Italy and Spain, weighed heavily on overall service sector expansion.