Business activity in the euro area fell to its lowest level in almost three years in August
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The indicator of business activity in the euro area in August fell to the lowest value in almost three years. According to preliminary estimates from Hamburg Commercial Bank (HCOB) and S&P Global, the PMI fell to 47 points. Analysts expected that the value of the indicator, as in July, will be 48.6 points. A value above 50 points means an increase in business activity, below – a decline.
The PMI index in the industry, remaining in the negative zone, in August rose to 43.7 points after 42.7 (a three-year low) a month earlier – against the background of an increase in export orders. S&P Global notes that this sector is waiting for further recovery, emerging in the second quarter (see “Kommersant” dated August 17), but they predict that the output of PMI in the industry in the positive zone until the end of the year may not happen. In August, for the first time since the end of 2022, the value of the service sector index also turned out to be below 50 points, dropping to 48.3 points from 50.9 points in July. Demand for services, S&P Global explains, is falling due to inflationary pressure and rising borrowing costs.
The most serious, as in the previous month, the decline in business activity in August was in Germany, where the composite PMI fell to its lowest level since May 2020: 44.7 points against 48.5 points in July. The indicator in the services sector entered the negative zone, amounting to 47.3 points after 52.3 points in July, in manufacturing it rose to 39.1 from 38.8 points a month earlier against the background of a slight increase in the number of new orders. In a commentary on the published data, Cyrus de la Rubia, chief economist at HCOB, stressed that the downward pressure on the euro area economy in August was exerted mainly by the German service sector.
The value of PMI in another major economy of the euro area – France – did not change in August and amounted to 46.6 points. The value of the service index decreased to 46.7 from 47.1 points a month earlier, the production index increased to 46.4 from 45.1 points.
Following the release of business activity data, most analysts polled by Trading Economics and Reuters noted that the likelihood of a pause in ECB rate hikes in September is growing, even though the inflation target has not been reached.
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