Euro zone services slide deepens economic gloom

The downturn in euro zone business activity has deepened far more than thought this month in a broad-based fall across the region, particularly in Germany, Europe’s largest economy, a survey showed.

In the bloc’s dominant services industry activity fell into decline and while the contraction in manufacturing output continued there were however some signs of a turnaround.

HCOB’s flash Composite Purchasing Managers’ Index (PMI) for the bloc, compiled by S&P Global and seen as a good barometer of overall economic health, dropped to 47.0 in August from July’s 48.6, its lowest since November 2020.

That was well below the 50 mark separating growth from contraction and lower than all expectations in a Reuters poll which had predicted a slight dip to 48.5.

A chunk of that activity was driven by firms completing old orders. The backlogs of work index fell to 45.2 from 46.0, its lowest since June 2020 when the COVID pandemic was cementing its grip on the world.

The services PMI sank to 48.3 from 50.9, its first time below the breakeven mark this year, as indebted consumers feeling the pinch from rising borrowing costs reined in spending. The Reuters poll had predicted a reading of 50.5.

“The service sector of the euro zone is unfortunately showing signs of turning down to match the poor performance of manufacturing,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

“Indeed, service companies reported shrinking activity for the first time since the end of last year, while output in manufacturing dropped again.”

This report’s information was first seen on REUTERS; to read more, click this link.