# Euro zone business activity contracted again in August -PMI
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro zone business activity contracts for second month in a row
Meta Description: Euro zone business activity declines in August as customers cut back on spending amidst rising cost of living and economic uncertainty. GDP contraction likely,
URL: https://financedigest.com/euro-zone-business-activity-contracted-again-in-august-pmihtml

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LONDON (Reuters) – Euro zone business activity contracted for a second month in August as demand sank, with customers wary of the deepening cost of living crisis and gloomy economic outlook curtailing their purchases, a survey showed.

S&P Global’s final composite Purchasing Managers’ Index (PMI), seen as a guide to economic health, fell to an 18-month low of 48.9 in August from July’s 49.9, below a preliminary 49.2 estimate. Anything below 50 indicates contraction.

A second month of deteriorating [business conditions in the euro area adds to the likelihood of GDP contracting in the third quarter,” said Chris Williamson, chief business economist at S&P Global](https://www.financedigest.com/2021-the-year-of-the-global-workforce-for-british-small-businesses.html "2021: The Year of the Global Workforce for British small businesses ").

August saw output fall at an increased rate, with companies and households [scaling back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS") their expenditures amid the recent surge in inflation and growing uncertainty about the economic outlook.

The new business index fell to 46.9 from 47.6, its lowest since November 2020.

A PMI covering the bloc’s dominant service industry fell to 49.8 from 51.2, below the preliminary estimate of 50.2 and marking its first [month below the breakeven level since](https://www.financedigest.com/uk-factories-suffer-worst-month-since-may-2020-as-economy-stumbles-pmi.html "UK factories suffer worst month since May 2020 as economy stumbles – PMI") March 2021.

Still, there was some relief from [easing price](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") pressures. While both the services input and output price indexes remained elevated they both fell, with the input index dropping to 72.5 from 74.7, its lowest reading [since February](https://www.financedigest.com/dollar-heads-for-first-weekly-gain-since-february.html "Dollar heads for first weekly gain since February").

Calls for an unprecedented 75 basis-point hike in interest rates from the European Central [Bank on Thursday were finely balanced although a very slim majority of economists said they expected a smaller rise](https://www.financedigest.com/sterling-rises-as-receding-bank-sector-worries-lift-sentiment.html "Sterling rises as receding bank sector worries lift sentiment"), a Reuters poll found. \[ECILT/EU\]

(Reporting by Jonathan Cable; Editing by Hugh Lawson)


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