According to a study, the euro zone’s business activity declined for a second consecutive month in August due to weak demand from consumers who were deterred from making purchases due to the rising cost of living and the bleak economic outlook.
The final composite S&P Global Purchasing Managers’ Index (PMI), a measure of the health of the economy, dropped from 49.9 in July to 48.9 in August, which was below the preliminary estimate of 49.2. Any number under 50 denotes contraction.
Chris Williamson, chief business economist at S&P Global, stated that “a second month of weakening business conditions in the euro area adds to the possibility of GDP shrinking in the third quarter.”
“Output fell at a faster rate in August as businesses and people cut back on spending due to the recent spike in inflation and mounting economic apprehension.”
Since November 2020, the new business index has dropped from 47.6 to 46.9, its lowest level.
Its first month below the breakeven level since March 2021, the PMI for the bloc’s leading service sector dropped to 49.8 from 51.2, below the prior estimate of 50.2.
Still, there was some relief from easing price pressures. The input index declined to 72.5 from 74.7, its lowest level since February, even though both the output and input price indices for services were still high.
According to a Reuters survey, calls for the European Central Bank to raise interest rates by a historic 75 basis points on Thursday were closely divided, even if a very small majority of economists indicated they anticipated a smaller increase.