Business activity in the Eurozone has declined further in August, with the economic downturn expanding from the manufacturing to the services sector, according to data compiled by S&P Global. The flash Composite Purchasing Managers’ Index (PMI) for the bloc, which reflects both manufacturing and services activity, fell to its lowest level since November 2020 at 47.0, down from 48.6 in July. This reading was below the 50-mark, which separates growth from contraction, and lower than economists’ expectations of 48.5.
Both manufacturing and services experienced a decline in output and new orders. Data shows that activity in the EU’s crucial services industry decreased for the first time this year and reached a 30-month low. Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, noted that “the service sector of the Eurozone is unfortunately showing signs of turning down to match the poor performance of manufacturing.”
Output in the Eurozone has been shrinking for three consecutive months, primarily driven by a fifth successive monthly decline in manufacturing, according to the data. S&P Global stated that excluding the pandemic, the drop in new business was the steepest since October 2012. New orders for goods continued to fall at one of the sharpest rates since the global financial crisis, accompanied by a second month of deteriorating demand for services.
There are growing concerns that the GDP in the euro area will decline in the third quarter as the bloc’s economy slid deeper into decline in August. Bert Colijn, a senior economist at ING, warns that “another weak PMI for the Eurozone confirms a sluggish economy with recession as a downside risk. Inflation pressures for services remain stubborn as wage pressures continue to be a concern.”
The hiring process in the Eurozone has nearly stalled as companies became hesitant to expand capacity due to deteriorating demand and gloomier prospects for the year ahead, the report highlighted.
This economic decline in the Eurozone raises concerns about the overall health of the region’s economy. The Eurozone may face a prolonged period of stagnation or further decline if these negative trends persist. It is crucial for policymakers and stakeholders to implement effective strategies to encourage economic growth and restore confidence in the market.
For more news and updates on the economy and finance, visit RT’s business section.
Source link
