According to data published by S&P Global on Tuesday, business activity in the 19 European countries that use the euro has been declining faster than expected, owing to a slowdown in the region’s services and manufacturing sectors.
The Eurozone’s final composite Purchasing Managers’ Index (PMI) fell to 46.7 in August from 48.6 in July, according to the calculations. It was lower than the preliminary projection, which predicted a drop to 47.
A PMI number of 50 or higher indicates that business activity is growing or expanding, whereas a reading of 50 or lower indicates that business activity is contracting. The indicator has now reached its lowest level since November 2020.
“Output in the services and manufacturing sectors fell for the first time in 2023.” The service sector halted a seven-month streak of expansion with the sharpest decline since February 2021. Meanwhile, goods production fell for the fifth month in a row and at a quick pace, according to a press release from S&P Global. According to the financial analytics business, Germany and France experienced the highest PMI declines, while Italy and Spain experienced more mild drops.
The main services The PMI fell to 47.9 from 50.9 the previous month, reflecting weaker consumer expenditure due to higher borrowing prices and high living costs. The demand index decreased to 46.7 from 48.2, its lowest level since early 2021.
“Employers were hesitant to beef up their teams. The way things have been going lately, it’s a hint they’ll be moving toward job losses sooner rather than later,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told Reuters in response to the projections.
According to analysts, current indicators indicate that the region is on the cusp of a recession.
“The Eurozone avoided recession in the first half of the year, but the second half will be more difficult.” The poor results contributed to a downward revision of our GDP ‘nowcast,’ which now stands at -0.1% for the third quarter,” de la Rubia said.
