The euro area private sector continued to expand in August, but the rate of expansion remaining one of the weakest seen over the past year-and-a-half and optimism among companies fell to a 23-month low on rising political concerns and higher prices.
The composite output index rose marginally to 54.4 in August from 54.3 in July, flash data from IHS Markit showed Thursday. But, the score was slightly below the forecast of 54.5.
Chris Williamson, chief business economist at IHS Markit, said, the euro area economy looks to have continued to grow at a steady rate in August, raising hopes that the third quarter could see GDP growth match the 0.4 percent expansion seen in the second quarter.
August’s small increase in the Eurozone PMI suggests that the region’s economy is continuing to perform well in third quarter, which will reassure the European Central Bank that it is right to be normalizing monetary policy very gradually, Jessica Hinds, an economist at Capital Economics, said.
Although growth rates in euro area improved slightly in manufacturing and services, both remained among the weakest seen for at least one-and-a-half years.
The services Purchasing Managers’ Index came in at 54.4 in August, up from 54.2 a month ago and in line with expectations.
Meanwhile, the manufacturing PMI fell unexpectedly to a 21-month low of 54.6 from 55.1 in July. The reading was expected to rise slightly to 55.2.
The composite new order growth picked up marginally in both sectors. Employment growth hit a six-month high, once again running close to survey record rates.
Meanwhile, future expectations of business activity deteriorated to a 23-month low. Optimism was subdued by recent signs of cooling demand, higher prices and rising political concerns.
On the price front, the survey showed that although input cost and selling price inflation rates remained among the highest seen over the past seven years, both cooled to three-month lows.
Within the eurozone, growth accelerated in France and Germany, but slowed across the rest of the single-currency area.
Germany’s private sector activity grew at the fastest pace in six months in August, with the composite output index improving to 55.7 in August from 55.0 in July. This was the highest reading since February and above the forecast of 55.1.
The services PMI rose to 55.2 from 54.1 in July. The score was expected to rise marginally to 54.3.
On the other hand, the manufacturing PMI slid to 56.1 from 56.9 in the previous month. Economists had forecast the index to fall moderately to 56.5.
Elsewhere, France’s private sector growth accelerated to a four-month high in August, thanks to stronger expansions in both the services and manufacturing sectors.
The composite output index rose to 55.1 from 54.4 in July. Moreover, the index remained above the neutral 50.0 mark for a twenty-sixth month in a row and the expected level of 54.6.
The services PMI climbed to 55.7 from 54.9 a month ago. Economists had forecast the index to rise slightly to 55.1 in August.
Manufacturers also reported a faster increase in output in August. The corresponding PMI came in at 53.7, up from 53.3 in July and forecast of 53.4.