According to the report from IHS Markit, August saw a loss of growth momentum across the eurozone private sector, following a rebound from the coronavirus disease 2019 (COVID-19) related downturn. Both business activity and new orders rose modestly, and at slower rates than in July. The softer overall expansion owed exclusively to weakness in the service sector as growth of manufacturing production quickened. Meanwhile, companies across the single currency bloc continued to scale back workforce numbers.

The flash IComposite PMI posted 51.6 in August, down from July’s reading of 54.9 and signalling a slowdown in the pace of output growth. July had seen the first expansion of activity in five months amid a rebound following the COVID-19 outbreak and disruption caused by lockdowns across the euro area. Differing trends were recorded across the two sectors covered during August. Service providers recorded broadly unchanged levels of business activity from those seen in July. On the other hand, manufacturing production rose sharply, with the rate of growth quickening to the fastest since April 2018.

New orders increased for the second successive month, but as was the case with activity the rate of growth slowed midway through the third quarter. Growth of total new business was undermined by a fall in new export orders*, itself driven by a sharp decline in new business from abroad at service providers as travel restrictions were reimposed in some countries following rises in COVID-19 cases. A marked increase in manufacturing new orders for the second month running helped to bring about a stabilisation of backlogs of work in the sector, thereby ending a 23-month sequence of depletion. Overall, outstanding business continued to fall, however, as service providers posted a sharper reduction than in July.