Europe News

Euro zone business activity slips, missing forecasts

Business activity in the euro zone slipped in August, with growth in both the region's manufacturing and services sectors slowing over the month.

The flash composite Purchasing Managers' Index (PMI) for the euro zone came in at 52.8 in August, according to data provider Markit, below Reuters forecasts of 53.4. It also marked a fall from July's reading of 53.8.

The assembly line at a factory of the French Fermob furniture company
Jess Pachoud | AFP | Getty Images

A reading above 50 indicates expansion, however, and August's reading marked the fourteenth consecutive month of growth.

The data come after official figures revealed that euro zone economic growth was stagnant in the second quarter. Gross domestic product in the region was flat, falling below analysts' expectations.

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Markit said the PMI data for August were consistent with only a low pace of GDP growth.

In a statement, Rob Dobson, senior economist at Markit, said business in the region had made "steady progress", but stressed it remained on track to post growth of only 0.3 percent-0.4 percent in the third quarter.

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"(This is) a level that is unlikely to stimulate any real turnaround in the labor market," he said in a statement. "Even before rising geopolitical headwinds began to buffet the economy, the double-digit unemployment rate prevailing in the euro zone was already excessively high."

On a country-specific basis, business activity growth was strong in Germany, with the composite PMI coming in at 54.9 in August, although this did mark a two-month low.

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In France - dubbed by some economists the "sick man of Europe" - the PMIs brought some good news this month. August's composite data for the country came in a 50, signaling that output had stabilized after a period of contraction, Markit said.

Jennifer McKeown, senior European economist at Capital Economics, said the data for France pointed to a continued stagnation of economic activity.

"In all, this survey will add to pressure on the ECB (European Central Bank) to do more to support the flagging euro zone economy, even while other major central banks start to move in the opposite direction," she said in a statement.