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Economic Report: PMI data show ‘near-stalling’ of eurozone services sector in August

Economic Report

Pedestrians pass cafes and retail stores on the pedestrianized Rue Montorgueil in Paris, France, on August 26, 2020.

Nathan Laine/Bloomberg News

Eurozone service activity barely expanded in August, according to data released on Thursday, a sign of the halting recovery from the coronavirus pandemic.

The IHS Markit eurozone services purchasing managers index registered 50.5 in August versus 54.7 in July. That is slightly above the flash reading of 50.1, and over the 50 mark indicating improving conditions.

A marked slowdown of growth in France, plus returns to contraction in Italy and Spain, weighed heavily on overall service sector expansion, IHS Markit said.

“The near-stalling needs to be viewed in the context of the strong expansion seen in July: business growth had surged to a near two-year high as economies opened up further from the severe COVID-19 lockdowns. However, the latest reading still sends a disappointing signal that the rebound has lost almost all momentum,” said Chris Williamson, chief business economist at IHS Markit.

Bert Colijn, senior economist at ING, said the PMI data was more worrying than the 1.3% decline in eurozone retail sales for July.

“While we still think the economy will continue to recover, we do

expect the recovery to slow somewhat over the summer months as reopening effects fade. As for retail sales, they likely overshot somewhat in May and June, as pent-up demand was fulfilled to some degree in the first months of reopening,” he said in a note to clients.

It was a different story in the U.K., which had the worst showing of the major economies in the June-ending quarter.

The IHS Markit/CIPS UK Services PMI rose to 58.8 in August, up from 56.5 in July.

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