The drop in production in the manufacturing sector and the decline in business activity in the services sector, in addition to the fact that inflationary impressions have “gained momentum in August”, have caused activity in the Eurozone to intensify its slowdown.
The advance of the PMI index of activity in the euro zone of Hamburg Commercial Bank (HCOB), prepared by S&P Global and published this Wednesday, has reduced from 48.6 points registered in July to 47 in August, its lowest level since November 2020 and since April 2013 “if the months of the pandemic are excluded”.
According to the consultancy, both sectors indicated a drop in new orders and job recruitment “almost came to a standstill”, as firms “saw more reactions to increasing their capacity” in the face of a possible “deterioration in demand and brighter prospects.” “. pessimistic for the next twelve months”.
The estimate to stand at 47 points
Specifically, the advance estimate of the composite PMI for the euro zone stood at 47 points in August, compared to 48.6 the previous month, its worst result in 33 months, after the deterioration of the manufacturing sector, with a PMI reading of 43.7 points, compared to 42.7 in July, has been added a services PMI of 48.3 points from 50.9 the previous month, its worst data in 30 months.
“Unfortunately, the service sector in the euro zone is showing signs of decline with similarly weak results to those of the manufacturing sector,” says Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, for whom analysis of the PMI figures leads to the conclusion that “the euro zone will contract by 0.2% in the third quarter”.
In this sense, the expert warns that the downward pressure on the euro zone economy during the month of August comes mainly from the German services sector, while in the manufacturing sector, German firms are also ending their production. “This development will only increase the notion that Germany is the sick man of the European economy,” he adds.
“This revolution will only increase the notion that Germany is the sick person of the European economy”
In this way, in August companies in the euro zone practically stopped hiring as a result of the deterioration in demand and more pessimistic prospects for the next twelve months, given that future expectations fell to their lowest level so far. . of year
Also, although inflationary pressures remained well below the level observed for much of the last two and a half years, driven by a fall in prices in the manufacturing sector, inflation rates for cost indices and prices charged increased. due, in part, to upward pressures from wage costs.
“ECB President Christine Lagarde has sounded the alarm that the economy may face wage increases and lower productivity, which would lead to higher inflation. It seems that these concerns are about to come true,” says De la Rubia. .
