Eurozone output beats expectations in August but economy remains weak
The euro has climbed against the dollar after survey data showed private sector output in the Eurozone beat expectations in August.
Read more: German manufacturing stays firmly in contraction mode in August
The preliminary private sector purchasing managers’ index (PMI), a closely-watched gauge of the economy, scored 51.8 in August, up from 51.5 in July and above a predicted score of 51.5. A score of above 50 indicates growth.
August’s Eurozone PMI, released by data firm IHS Markit, showed the trend of growth in the service sector compensating for weakness in manufacturing continuing.
Factory output fell once again in August, with the PMI score at 47.0. The euro area’s manufacturers have suffered under weak foreign demand due in large part to trade tensions and a global slowdown.
The service sector registered a PMI score of 53.4, showing healthy growth. Low unemployment and rising wages have maintained domestic demand.
Andrew Harker, associate director at IHS Markit, said: “The dynamics of the Eurozone economy were little changed in August, with solid growth in services continuing to hold the wider economy’s head above water despite ongoing manufacturing decline.”
“While the rate of overall expansion ticked up, we’re still looking at GDP only rising by between 0.1 per cent and 0.2 per cent” in the third quarter, he said.
Worryingly for the area’s outlook, expectations among survey respondents about future growth fell to their lowest level since 2013 during the Eurozone crisis.
Although Germany continued to disappoint, France’s economy was a relative bright spot in August. Its manufacturing sector returned to growth while services continued to see strong growth.
Read more: A third of investors expect recession as trade war fears loom
Justin McQueen, a market analyst at Daily FX, said that despite the euro nudging higher, “this data is unlikely to deter the [European Central Bank (ECB)] from announcing a stimulus package in September”.
(Image credit: Getty)