The Purchasing Managers’ Index has plunged to an almost three-year low
© Getty Images / Murat Taner
Business activity in the 19 European countries that use the euro has been contracting faster than anticipated, prompted by a slowdown in the region’s services industry and manufacturing sector, data compiled by S&P Global showed on Tuesday.
According to the calculations, the Eurozone’s final composite Purchasing Managers’ Index (PMI) plunged to 46.7 in August from July’s 48.6. It came in lower than the preliminary estimate, which suggested a decline to 47.
An indicator of the overall economic health, a PMI reading over 50 signals growth or expansion of business activity, while a reading below this threshold suggests a contraction. The indicator is now at its lowest since November 2020.
“For the first time in 2023 so far, output fell in both the services and manufacturing sectors. The service sector ended a seven-month run of growth with the steepest contraction since February 2021. Goods production meanwhile dropped for the fifth month running and at another rapid rate,” S&P Global said in a press-release. Germany and France registered the steepest PMI declines, while more modest falls were posted in Italy and Spain, according to the financial analytics firm.
The headline services PMI also dropped, to 47.9 from 50.9 the previous month, on lower consumer spending due to the rise in borrowing fees and high living costs. The gauge of demand fell to 46.7 from 48.2, its lowest since early 2021. The composite employment index slumped to 50.2 from 51.4.
“Employers weren’t too keen on beefing up their teams. The way things have been going down lately, it’s a sign they’ll be moving towards job cuts sooner, not later,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, told Reuters, commenting on the calculations.
Analysts warn the current readings suggest that the region is on the verge of recession.
“The Eurozone didn’t slip into recession in the first part of the year, but the second half will present a greater challenge. The disappointing numbers contributed to a downward revision of our GDP ‘nowcast’ which stands now at -0.1% for the third quarter,” de la Rubia stated.
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