Business activity in the eurozone fell deeper into contraction territory in August, while some inflationary pressures returned, survey data published last week showed.
The HCOB flash eurozone purchasing managers’ index (PMI) survey, compiled by S&P Global, fell to 47 in August from 48.6 in July, as the downturn in the countries that share the euro currency spread further from manufacturing to services. PMI readings below the 50 mark indicate contraction in the sector while readings above 50 indicate expansion. Another weak PMI for the eurozone confirms a slowing economy, with a recession looming on the horizon.
On the other hand, inflationary pressures for services remain stubborn as wage pressures continue to be of a concern to the European Central Bank and a reminder that the interest rate hiking cycle is not over yet.
Meanwhile, in Germany, producer prices fell more than expected in July, indicating that inflationary pressures in Europe’s largest economy are fast dissipating. Producers’ prices were down by six per cent in July compared with the same month last year, when producer prices had soared due to the war in Ukraine, the German statistics office Destatis said on Monday. Analysts had expected producer prices to fall by 5.1 per cent. It was the first year-on-year fall in producer prices since November 2020 and the sharpest decline since October 2009 during the Global Financial Crisis.
Rapidly falling producer prices and lackluster business sentiment indicators have prompted some economic commentators to label Germany as “the sick man of Europe”, although such comparisons may be premature.
Finally, sales of previously owned US homes fell in July, constrained by a lack of inventory and higher interest rates. Sales declined 2.2 per cent in July compared to June to a seasonally adjusted, annualised rate of 4.07 million units, according to a report by the National Association of Realtors (NAR) published on Tuesday.
Sales were 16.6 per cent lower compared with the same month last year – the slowest July rate since 2010. While home sales have fallen by 22.3 per cent through the first seven months of the year compared with the same period in 2022, prices are being propped up by buyers competing for a near-record low supply of properties. The median sales price across the US rose to $406,700 (€375,136) in July, marking its first annual increase since January and the second month in a row that it has been above $400,000, according to the NAR.
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