The Purchasing Managers’ Index fell to a level that hasn’t been seen in almost three years.
Data collected by S&P Global on Tuesday showed that business activity in the 19 European countries that use the euro has been shrinking faster than expected due to a slowdown in the region’s service industry and manufacturing sector.
The figures show that the final composite Purchasing Managers’ Index (PMI) for the Eurozone fell from 48.6 in July to 46.7 in August. It was less than the initial estimate, which said it would go down to 47.
A PMI reading over 50 shows that business activity is growing or expanding, while a PMI reading below 50 indicates that business activity is shrinking. Since November 2020, this is the lowest the index has been.
“For the first time so far in 2023, output fell in both the production and services sectors. After growing for seven months in a row, the service sector shrank the most since February 2021. “At the same time, goods production fell for the fifth month in a row and at a fast rate,” S&P Global said in a press release. According to the financial analytics company, Germany and France had the most significant drops in PMI, while Italy and Spain had smaller drops.
The primary services PMI also decreased from 50.9 last month to 47.9 this month because consumers spent less money because of higher borrowing fees and high living costs. Demand fell from 48.2 to 46.7, which is the lowest it has been since early 2021. The overall employment measure fell from 51.4 to 50.2.
Analysts say that the signs show that the region is about to go into a slump.
“The Eurozone didn’t fall into a recession in the year’s first half, but the second half will be harder. Our GDP ‘nowcast’ for the third quarter has been changed to -0.1% because of the disappointing numbers,” de la Rubia said.