Fra S&P Global:
HCOB Eurozone Services PMI®
The HCOB Eurozone Services PMI Business Activity Index signalled an eighth consecutive month of growth at the end of
the third quarter. Registering above the 50.0 no-change mark, as has been the case since February, the latest figure indicated
sustained growth in services output. However, falling to 51.4 in September, from 52.9 in August, the index pointed to an
expansion that was only modest and the weakest for seven months.
Higher business activity levels were achieved despite the level of incoming new work decreasing. This was the first time since
February that demand for services has fallen, although the contraction was only marginal. Outstanding orders provided services
firms with a means to support activity. Backlogs of work fell for the fourteenth time in the past 15 months, and to the quickest
extent since February.
Employment levels continued to rise across the eurozone’s service sector in September. While the rate of job creation was
fractionally faster than in August, it was weaker than seen on average since data collection began in July 1998.
Services inflation cooled in the euro area at the end of the third quarter. Notably, rates of increase in input costs and output
prices were their softest in 42 and 41 months, respectively.
Finally, expectations for growth over the next 12 months strengthened in September. This marked the first month since May
that business confidence has improved. That said, the level of optimism was subdued by historical standards.
Comment
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“At first glance, the services sector in the eurozone seems to be holding up fairly well. It’s still growing, and the slowdown is
not too steep just yet. But when you dig a little deeper and look at individual countries, the picture is not as rosy – except for
Spain. Here, we are rubbing our eyes in amazement. Service providers there are booming, with the index shooting up to 57
points. The situation in the other three leading eurozone economies is quite different. In France, service providers’ business
activity slowed down after the Olympics effect and in Germany and Italy, growth almost hit a wall in September. Even if
Spain manages to avoid getting pulled down by the struggles of its neighbours, the eurozone’s services sector as a whole
seems to be headed for more sluggish growth.
“On the ground, most service sector employees have not really felt the pinch yet. In fact, the hiring rate picked up in Spain
and France, and even in Italy, jobs growth only dipped slightly. It is Germany where things look bleakest, with companies
there actually cutting staff. This is where the recession in manufacturing is making itself felt, as in this environment the
corresponding companies are placing fewer orders with the service sector.
“The situation in the service sector in the eurozone will continue to deteriorate. This is indicated by the decline in new
business. For the first time since February, it has fallen in the eurozone compared to the previous month. The development
in Germany and France is similar. Factoring in the ongoing contraction in industry, the eurozone economy is likely to have
grown only at a marginal rate in the third quarter. Our GDP nowcast model, which takes into account the PMI indicators, also
points to only minimal growth.
“On the plus side, operating costs in the services sector saw their slowest rise since early 2021, and inflation in selling prices
is also easing off. Given the overall economic weakness, this is a good case for the ECB to cut interest rates in October. And
indeed, only recently, ECB president Christine Lagarde did hint at a rate cut this month.”
