Eurozone business activity contracted for second straight month in August – Flash PMI

Workers carry packaged pasta at De Cecco’s factory in Fara San Martino, Italy, November 29, 2021. REUTERS/Remo Casilli

LONDON (Reuters) – Business activity in the eurozone contracted for the second month in a row in August. The cost of living crisis has forced consumers to cut spending and supply constraints have also hit manufacturers, a survey showed on Tuesday.

S&P Global’s Flash Composite Purchasing Managers Index (PMI) is considered a good indicator of overall economic health, dropping from 49.9 in July to 49.2 in August.

Any reading below 50 indicates a contraction, and preliminary estimates for August were the lowest since February 2021.

“The latest PMI data for the eurozone shows that the economy is contracting in the third quarter of this year,” said Andrew Harker, director of economics at S&P Global.

A Reuters poll last month showed growth of 0.2% this quarter.

Demand also fell for the second month in a row, suggesting no imminent turnaround. The new business index stood at 47.7, slightly above July’s 47.6.

The PMI covering the block’s dominant services sector fell to 50.2 from 51.2, just above breakeven and below the 50.5 forecast in the Reuters poll.

Service firms have raised rates at a slower pace this month, but the production price index is well above its long-term average. That was 59.9, down from 62.1 in July.

“Cost of living pressure means that the recovery in the services sector following the lifting of restrictions due to the pandemic has slowed, but manufacturing continues to trend downward in August,” Harker added.

Manufacturing activity fell again this month. Factory PMI fell to 49.7 from 49.8, the lowest since June 2020, while the index that measures output fed to the composite PMI was 46.5, compared with 46.3 in July.

The median forecast in a Reuters poll put the headline figure at 49.0.

This drop in activity came despite factories completing old orders and building a surplus of finished goods at the fastest rate since the study began in mid-1997.

Stocks on the finished goods index rose from 52.5 to 53.3.

Reported by Jonathan Cable.Editing by Susan Fenton

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