Eurozone Composite PMI Remains High in August, Persistent Price Pressures Strengthen Expectations for ECB Policy Tightening

(1) According to data released by S&P Global, the Eurozone's composite PMI for August recorded 52.0, matching July's eight-month high and approaching the long-term average of 52.3. The Services PMI fell to 51.6, a two-month low, but remained in the expansion zone for the second consecutive month. (2) On the demand side, performance was positive. New orders in August continued July’s robust growth, tying for the highest level since November last year. For the first time in four and a half years, private sector export orders grew again, mainly driven by manufacturing, while export demand in the services sector slightly weakened. In terms of employment, private sector employment expanded for the first time this year, and hiring in the services sector accelerated to an eight-month high. (3) Regional economic performance was mixed, with Spain and Italy being the main growth drivers. Germany’s economic expansion was the strongest since March, while France saw commercial activity contract for the eighth consecutive month. (4) The inflation easing process has stalled, with composite input cost inflation only ticking down slightly; output price increases remained stable compared to July. Input and output price inflation in the services sector both rose to a three-month high, and overall price pressures remain above levels seen before the Middle East conflict began. (5) S&P Global economists stated that August data suggest the Eurozone could achieve solid economic growth in the third quarter. The cooling inflation trend has stopped and, combined with strong economic resilience, may support the European Central Bank in adopting tightening measures at next week’s meeting. Overall business confidence remained stable, but there was sharp divergence in industry sentiment between manufacturing and services.