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Eurozone Private Sector Moves Further Into Contraction Zone

eurozonepmi nov23 05sep22 lt

The euro area private sector contracted for the second straight month as the service sector joined manufacturing in recording output fall in August, final data from S&P Global showed on Monday.

The final composite output index fell to an 18-month low of 48.9 in August from 49.9 in the previous month. The flash score was 49.2.

A reading below 50.0 indicates contraction. Although still only moderate, the rate of decline signaled in the survey was more pronounced than that seen at the start of the third quarter.

The services Purchasing Managers' Index came in at 49.8 in August versus 51.2 in July and the flash 50.2. Services activity moved into the negative territory for the first time since March 2021.

While the fall in services activity was marginal, manufacturing output declined in the past three consecutive months.

Although the overall rate of decline in the private sector remained only moderate, commensurate with GDP falling at a quarterly rate of just 0.1 percent, the latest data point to the economy undergoing its weakest spell for nine years, excluding the downturns seen during the height of the pandemic, Chris Williamson, chief business economist at S&P Global Market Intelligence said.

The weakness in overall activity reflected falling demand. At the same time, employment continued to rise but the pace of job creation softened amid lower workloads and muted business sentiment.

On the price front, the survey showed that both input costs and output prices continued to ease, providing some respite for firms.

Among major member countries, the decline was particularly marked in the largest economy, Germany. Germany posted its steepest fall since the initial wave of the COVID-19 pandemic.

Germany's composite output index fell to a 27-month low of 46.9 in August from 48.1 in the previous month. The flash reading was 47.6. At 47.7, the services PMI was down from 49.7 in July and the flash score was 48.2.

Although output continued to increase in France and Spain, the rates of expansion slowed to the weakest in 17 and seven months, respectively. Italy's private sector continued to shrink but he pace of decline eased from July.

At 50.4, the France's composite output index was down from 51.7 in July and signaled the slowest expansion of private-sector output in the current 17-month sequence of growth. The flash score was 49.8.

The services PMI declined to 51.2 from 53.2 in the previous month. The flash score was 51.0.

Italy's private sector posted a back-to-back decline in output in August. Nonetheless, the composite output index rose to 49.6 from 47.7 in July. At the same time, the services PMI registered 50.5, up from 48.4 in July, to signal a renewed uplift in services activity.

Spain's private sector economy headed towards stagnation in August, with both the manufacturing and services sectors registering only marginal growth over the month. The composite output index dropped to 50.5 from 52.7 in July and its lowest reading since January. The services PMI stood at 50.6, down from 53.8.

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