PMIs: Services boost in Germany and Spain as Russia and France falter

Germany and Spain's services industries appear increasingly healthy, after both countries posted better-than-expected purchasing managers' index (PMI) figures for August this morning – but things are looking less rosy for France and Russia.

 

Germany experienced its strongest rise in business activity since March, with the services business activity index rising to 54.9 in August, up from 53.8 in July. The composite output index rose to 55, up from 53.7. 

 

This is the 27th month in a row activity has risen. Any figure above 50 denotes growth in the sector.

 

Oliver Kolodseike, economist at Markit and author of the report, said the results suggested “Germany’s service sector is in good shape”. 

 

He added: “Service providers are the most optimistic about their 12-month outlook since April and business outstanding accumulated for the first time in six months, suggesting that companies will remain busy, at least in the short term. 

 

“Strong tailwinds from both the manufacturing and service sectors are propelling the German economy forward in August. Based on survey data available so far for the third quarter, we should expect another quarter of GDP growth.” 

 

Spain's business activity index was 59.6, down marginally on July, when it stood at 59.7, but was still above expectations. The country experienced a “sharp” rise in activity and new business, marking its 11th successive monthly increase in employment. 

 

Slower inflation of input costs and output prices also helped the sector. 

 

In France, however, business activity eased to “a marginal pace” in August, falling to near contraction levels, from 52 to 50.6. The composite index fell from 51.6 to 50.2. 

 

Jack Kennedy, Markit's senior economist at Markit, said: “The French service sector lost further momentum in August, with activity growth slowing to a seven-month low. Prospects for third quarter GDP therefore look softer, following stagnation recorded in the second quarter. The survey’s bright spot was the strongest business expectations reading for almost three-and-a-half years, signalling that companies are becoming a little more hopeful of a revival over the coming year.” 

 

Russia, meanwhile, entered contraction territory, falling to 49.1 from 51.6 in July. The composite index was 49.3. 

 

Services were affected by “excess resources” and no improvement to the level of new orders coming in amid ongoing macro-economic headwinds. 

 

Senior economist Paul Smith said: “A lot of the issues seem to be stemming from a challenging economic environment, which is undermining demand. Associated weakness of the rouble has also led to strengthening cost pressures, particularly in the manufacturing economy. These issues have combined to create an uncertain economic outlook, and companies are subsequently seeking to cut any excess labour at their units, be it through the non-replacement of leavers or forced redundancies.”