Boost in Euro Zone Business Activity After Olympics, But Weak Demand Looms: Survey
LONDON - Euro zone business activity received a boost from France hosting the Olympic Games last month, according to a survey. However, the bloc's malaise is expected to return once the Paralympics wrap up, as demand remains weak.
HCOB's composite Purchasing Managers' Index for countries in the currency union, compiled by S&P Global, rose to 51.0 in August from July's 50.2. While this marks the sixth consecutive month above the growth threshold of 50, it was slightly below the initial estimate of 51.2.
"The Olympic Games in Paris brought plenty of victories, and the French service sector was certainly among the winners. But the big question is whether this boost is sustainable," said Cyrus de la Rubia at Hamburg Commercial Bank.
Despite the positive impact from the Games and ongoing Paralympics, a slowdown in growth is expected to resume in the coming months, with overall demand in the currency union declining for a third consecutive month.
The final PMI for the services industry surged to 52.9 from 51.9, offsetting a contraction in the manufacturing sector. However, optimism about future business prospects among services firms decreased, with the business expectations index dropping to 59.1 from 60.4, its lowest reading this year.
Analysis:
The recent boost in Euro zone business activity following the Olympic Games in France may provide a temporary uplift, but weak demand remains a concern for the bloc's economic health. The composite PMI's positive trend above 50 indicates growth, but the slight dip from initial estimates suggests a potential slowdown. The ongoing Paralympics could offer some support, but overall demand has been on a downward trend for three months. While the services industry showed resilience, the decline in future business expectations signals caution among firms. Investors and businesses should monitor these trends closely to navigate potential challenges in the Euro zone market.