An index that measures activity in the US service sector grew at a quicker rate than expected in August, according to a report published on Wednesday by the Institute for Supply Management (ISM).

The US ISM Services purchasing managers’ index (PMI) rose from 52.7 in July to 54.5 in August, exceeding expectations of 52.6. Looking at some subsectors, business activity/production inched up from 57.1 to 57.3. On the other hand, new orders soared from 55.0 to 57.5 while employment leapt to 54.7 from 50.7. Prices also rose from 56.7 to 58.9.

Policymakers at the Federal Reserve, the US central bank, consider the services sector as crucial to bringing inflation down to their two per cent target, and Wednesday’s ISM report does not show that any economic slowdown is under way.

Policymakers at the Federal Reserve consider the services sector as crucial to bringing inflation down to their 2% target

Meanwhile, retail sales in the eurozone dipped in July, adding to signs of weak confidence in the currency bloc.

Compared to July of last year, retail sales volume fell one per cent in the eurozone and by 1.2 per cent in the EU, according to Europe’s official statistics office Eurostat. Data showed that the volume of retail trade was down 3.4 per cent for vehicle fuels, and 2.2 per cent for food, drinks and tobacco in the eurozone over the same period.

Consumption in the region has been slowing as real incomes fall and households are allocating a larger proportion of their incomes on expensive energy and on credit and mortgage repayments, leaving a smaller budget for the purchase of other goods.

Finally, in Germany, industrial output fell again in July, as Europe’s powerhouse enters the third quarter on the wrong foot.

Industrial production in Europe’s largest economy fell 0.8 per cent in July compared with the previous month, worse than economists’ predictions of a 0.5 per cent fall and following a downwardly revised 1.4 per cent dip in June. Industrial production contacted 2.1 per cent on an annual basis, after declining 1.5 per cent in the previous month.

Germany’s key industrial sector has been going through turbulent times in recent months, as inflation and high energy prices alongside a weakening Chinese economy take their toll on Europe’s industrial giant.

 

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