August saw the eurozone economy remain resilient in the face of ongoing headwinds, with business activity increasing at the fastest pace in over four years. Levels of incoming new business also rose at a solid, albeit slightly slower, pace to support the second-quickest rate of job creation since May 2011.
The final Markit Eurozone PMI® Composite Output Index rose to 54.3 in August, up from 53.9 in July, as output growth accelerated moderately in both the
manufacturing and service sectors. Spain recorded by far the sharpest growth of economic activity among the ‘big-four’ eurozone nations in August, seeing its second-strongest expansion over the past eight-and-a-half years.
Strong and accelerated growth was also registered in both Germany and Italy, with rates of increase hitting five- and 53-month highs respectively. The pace of growth continued to disappoint in France, easing back towards stagnation on the back of a weaker expansion of services business activity and a second successive monthly contraction of manufacturing production. Despite this, combined output nonetheless rose for the seventh month in a row. Ireland, meanwhile, recorded a further substantial increase in economic output.
The rate of job creation in the eurozone accelerated to one of the fastest seen over the past four years, bettered during this sequence only by that signalled in May. Alongside solid gains in output and new business, the latest rise in staffing levels reflected a further accumulation of backlogs of work. Outstanding business rose at the quickest pace since May 2011. Staff headcounts were raised in Germany, Italy, Spain and Ireland, although only Germany posted a faster rate of growth (44-month high). Employment in France was unchanged, following a modest decline in July.
Average input prices rose for the seventh successive month in August. A further solid increase in costs at service providers, mainly due to higher wages and
salaries, was partly offset by the first decline in manufacturers’ purchase prices since February (reflecting lower oil prices). Average output charges increased negligibly in August, the first increase since March 2012. Selling prices were raised in Germany, Spain and Ireland, but cut in France and Italy.
The Eurozone Services Business Activity Index rose to 54.4 in August, matching June’s four-year high and slightly above the earlier flash estimate of 54.3. The headline services index has now signalled expansion in each of the past 25 months. Ireland and Spain registered the steepest growth of business activity among the nations covered by the survey, although rates of expansion edged lower in both cases. Growth picked up in Germany and Italy, reaching five- and 65-month highs respectively. An expansion of output was registered in France for the seventh month running, although the pace of increase was only moderate and the weakest during that sequence.
Higher eurozone services output reflected a further increase in incoming new business and an accumulation of backlogs of work. However, the rate of expansion in new work received eased slightly to a six-month low. In contrast, job creation accelerated to its second-fastest pace in over four years, with staff headcounts raised across the ‘big-four’ national services economies and Ireland.
Business optimism† ticked higher in August, recovering from July’s seven-month low. Confidence improved in Germany (four-month high), France (41-month record) and Ireland (three-month high). August’s survey highlighted a weakening of cost inflationary pressures in the euro area service sector, with input costs posting the slowest monthly rise since February. The current sequence of decline in selling prices was extended to 45 months, driven by lower charges from French and Italian firms.