Eurozone PMI Manufacturing rose from 42.7 to 43.7 in August, above expectation of 42.8. However, the services sector took a hit, with its PMI descending to a 30-month low of 48.3 – the first contraction witnessed since December. Consequently, the Composite PMI declined to 47.0, its lowest in 33 months, and, excluding pandemic months, since April 2013.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, weighed in that services downturn is now mirroring the lackluster performance of manufacturing. He anticipates a -0.2% contraction in the Eurozone’s Q3 based on current indicators.
August’s data echoes ECB President Christine Lagarde’s warning about rising wages and declining productivity potentially boosting inflation. “as a result, the ECB may be more reluctant to pause the hiking cycle in September,” de la Rubia commented.
Despite the broader decline, there’s a semblance of hope for manufacturing. The sector’s PMI showed minor improvement, hinting at a potential gradual recovery by early next year.
A notable contributor to the downturn was Germany’s swift service sector contraction which fuels the discussion of “Germany being the sick man of Europe.”
