Eurozone Private Sector Activity Gains Momentum
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8/22/2013 7:05 AM ET
Eurozone's private sector business activity expanded at the sharpest pace in more than two years in August, driven by the robust performance in Germany, preliminary results of the purchasing managers' survey by Markit Economics revealed Thursday.
Although the survey suggests that the region will gain momentum going forward, the ongoing contraction in France is likely to weigh on the pace of recovery.
The headline Eurozone composite output index, a gauge of business activity in both manufacturing and services, rose more-than-expected to 51.7 in August from 50.5 in July. The improvement for the fifth successive month took the reading to a 26-month high.
Economists had forecast the index score to rise to 50.9. Index readings above 50 indicate expansion of the sector, while readings below 50 suggest contraction.
According to Markit Chief Economist Chris Williamson, the economic picture from the surveys is coming into line with policymakers' expectations of a modest yet still fragile return to growth.
However, Capital Economics Chief European economist Jonathan Loynes noted that, for now at least, growth remains a long way short of the rates required to start to address the region's debt crisis.
The manufacturing Purchasing Managers' Index rose to 51.3 in August from 50.3 in July. This was the highest reading in 26 months and was above the expected score of 50.7. The output index in manufacturing rose to 53.4, a 27-month high, from 52.3 in the previous month.
The services PMI climbed to a 24-month high of 51 from 49.8 in July. The consensus score was 50.2.
Both manufacturers and service providers reported higher output, with goods producers posting the larger increase. Output growth in manufacturing was the fastest since May 2011, while services showed the biggest rise since August the same year.
New business received by Eurozone's private sector firms increased marginally. While new orders received by manufacturers rose for the second straight month, and at the sharpest pace since May 2011, new business at service providers continued to decline.
Employment dropped for the twentieth successive month, with rates of job losses accelerating slightly in both manufacturing and services compared with July. However, the overall rate at which headcounts are falling has eased since earlier in the year.
Due to higher oil and fuel prices, input costs rose at the fastest rate since January. But output prices fell further as companies offered discounts to boost sales.
Underpinned by new business growth, the German private sector continued to expand, while the downturn in France worsened. At 7-month high, Germany's composite PMI was 53.4 in August versus 52.1 in July.
Meanwhile, the French private sector shrank at a faster pace driven by lower output in both the services and manufacturing sectors. The French composite output index dropped to 47.9 in August from July's 17-month high of 49.1.
by RTT Staff Writer
AI
