LONDON: Global business activity largely slowed further last month as services firms struggled in the face of weak demand as rising prices and borrowing costs made indebted consumer rein in spending, a raft of surveys showed on Tuesday.
In the euro zone, the picture was gloomier than initially thought as the bloc’s dominant services industry fell into contractionary territory, suggesting the bloc could slide into recession.
Germany’s services sector contracted for the first time this year and France’s shrank more than first estimated. In Britain, outside the European Union, its survey showed the sharpest business slowdown in seven months.
Asia’s surveys for August were also more downbeat with China’s services activity expanding at the slowest pace in eight months as weak demand continued to dog the world’s second-largest economy while in India growth lost some steam.
Japan proved an outlier as service sector activity expanded there at its quickest pace in three months, underpinned by robust consumer spending as inbound tourism regained momentum.
Global equities fell on Tuesday as the weak readings rekindled worries over China’s sputtering post-pandemic economy.
“Weaker economic data out of Asia was the main driver of market sentiment,” noted economists at RBC.
HCOB’s final euro zone Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good barometer of overall economic health, dropped to 46.7 in August from July’s 48.6, a low not seen since November 2020.
That was below the 50 mark separating growth from contraction for a third month and weaker than a preliminary estimate for 47.0.
Tuesday’s figures point to a 0.1% contraction in euro zone gross domestic product this quarter, S&P Global said.
“The final PMIs published today were revised down from the already-low levels reported in the flash measure two weeks ago. We continue to forecast a recession in the second half of the year,” said Adrian Prettejohn at Capital Economics. The headline services PMI for the bloc sank to 47.9 from 50.9, below the flash 48.3 estimate, as the new business index, a gauge of demand, dropped further below breakeven to 46.7 from 48.2, a low not seen since early 2021.
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