Eurozone private sector continued its expansion with services activity picking up to a three-month high in August. So far, French and German economies led the strong performance, while some others struggled to sustain recovery.
The Markit Final Eurozone composite output index came in at 56.2 in August, down from 56.7 in July, data from Markit Economics showed Friday. But the reading was slightly above the flash estimate of 56.1.
"The final PMI data so far in the third quarter are suggesting there may only be a modest loss of growth momentum from Q2's robust 1% GDP gain," said Rob Dobson, senior economist at Markit. "However, the widening performance disparities between the big-four economies remain a cause of concern."
With activity in relatively good shape in Germany and France, the Eurozone service sector activity rose to a three-month high. At 55.9 in August, the Purchasing Managers Index reading was slightly above July's 55.8 and also better than the flash estimate of 55.6.
Solid services business activity reported by the purchasing managers for August suggests that Eurozone growth could hold up pretty well in the third quarter after GDP spiked up by 1% in the second quarter, said Howard Archer at IHS Global Insight.
While, manufacturing output growth eased to its weakest since May, growth in services accelerated to a 3-month high. Overall new business expanded for the twelfth successive month in August, with the rate of growth at a three-month high.
In August, the rate of jobs growth remained modest, however, the fastest since April 2008. Staffing levels also rose in both manufacturing and service sectors for the fourth consecutive month.
Despite recent increases in staffing levels, backlogs of work continued to increase in August. Outstanding business expanded for the ninth month in a row as solid gains were reported in both manufacturing and service sectors.
After holding the key interest rate again at 1%, the European Central Bank raised growth outlook. The central bank now expects eurozone growth to be in a range between 1.4% and 1.8% in 2010 and in a range between 0.5% and 2.3% in 2011. The range has also been revised upwards for both 2010 and 2011, reflecting carry-over effects from the projected stronger growth towards the end of 2010.
Today survey showed that overall average costs increased for the eleventh month running in August. Manufacturing input price inflation eased to a six-month low, while average costs at service providers rose at the quickest pace since October 2008. August data signaled a slight increase in average output prices, ending a three-month period of charge reductions.
Euro area consumer price annual inflation was 1.6% in August. Annual HICP inflation is seen in a range between 1.5% and 1.7% this year and between 1.2% and 2.2% for 2011, ECB President Jean-Claude Trichet said yesterday.
Among the big-four Eurozone nations, services activity was relatively strong in Germany and France, but this was not the case in Italy and Spain. Commenting on survey data, Clemente De Lucia, an economist at BNP Paribas said GDP is expanding at relatively high pace in Germany and France, while it is stagnating in Spain and Italy.
The combined output of the German manufacturing and service sectors expanded at a slower pace than in July with the final Composite Output Index dropping to 58.4 in August from 59 in July.
The French composite index dropped slightly in August to 59.5 from 59.7. Although at a 4-month low, the French services PMI reading of 60.4 suggests strong expansion. At the same time, manufacturing output expanded at a faster pace.
The Italian Markit/ADACI services PMI rose to 51.4 from 49.6 last month. The tertiary sector returned to expansionary territory during August, following a slight contraction in July.
Spain's service sector contracted in August, ending a five-month sequence of rising activity. The decline to 49.2 largely reflects lower new order levels. Manufacturing growth slowed as new orders rose only modestly.
Elsewhere, data released by Eurostat confirmed a modest growth in Eurozone retail sales. After rising 0.2% in June, retail trade grew only 0.1% in July. Annually, it slowed slightly to 1.1% from 1.2%.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.