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Eurozone Private Sector Logs Moderate Growth

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The euro area private sector logged a moderate growth in August, though the pace of expansion improved slightly more than initially estimated, the latest data from IHS Markit showed Wednesday.

The final composite output index rose to 51.9 in August from 51.5 in July. The flash score was 51.8. Any reading above 50 indicates expansion in the sector.

The survey revealed a marked divergence between the performance of the manufacturing and services economies as the manufacturing sector contracted amid an improvement in services growth.

The latest reading indicates that GDP will rise by just 0.2 percent in the third quarter, Chris Williamson, chief business economist at IHS Markit, said.

The big question is how long this divergence can persist before the weakness of the manufacturing sector spreads to services and households, the economist noted.

Williamson expects to see renewed stimulus from the European Central Bank in September as the apex bank seeks to revive demand and stem the spreading malaise.

The euro area services Purchasing Managers' Index edged up to 53.5 in August from 53.2 in July, the survey showed. The flash estimate was 53.4. Germany registered the strongest gains in service sector activity.

However, at the composite level, France performed best, with growth driven by a solid service sector performance and a renewed rise in manufacturing output. The composite PMI came in at 52.9 versus the flash score of 52.7, signaling the quickest growth in output since November last year.

The services PMI posted 53.4 in August compared to 52.6 in July. The reading signaled the fastest expansion in business activity since last November. The flash reading for August was 53.3.

Germany's private sector output logged only a marginal rise as growth in services was countered by a marked contraction in manufacturing.

The final composite output index climbed to 51.7 in August from 50.9 in July and above the flash 51.4. The services PMI came in at 54.8 versus July's six-month low of 54.5 and the initial estimate of 54.4.

Elsewhere, official data from Eurostat showed that euro area retail sales declined at the fastest pace seen so far this year in July. Sales decreased 0.6 percent month-on-month in July, in contrast to a 1.2 percent rise in June.

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