Eurozone business growth weak as manufacturing woes rumble on

BRUSSELS — Eurozone business growth rose slightly in August but manufacturing output was down for the seventh month running and job creation remained weak, a closely watched survey said on Thursday. 

The service sector continued its solid growth across the single currency area, but manufacturing output was down everywhere except France, according to data from IHS Markit.

IHS Markit’s composite eurozone PMI, seen as a key indicator of business confidence, rose to 51.8 in August from July’s three-month low of 51.5, but still bumping along at one of the weakest levels in six years.

A reading above 50 points indicates an expansion, and the long-term trend appears to be heading towards stagnation.

Andrew Harker of IHS Markit said there was no change to the recent trend of the eurozone’s service sector propping up the wider economy despite a decline in manufacturing.

“The lack of a quick rebound from the recent economic slowdown has impacted firms’ confidence, with sentiment the lowest in over six years. It appears that companies are braced for a sustained period of weakness,” he said.

The rate of job creation in August was down from a month earlier, reaching its weakest level in more than three years.

Europe’s economic powerhouse Germany saw its biggest fall in new manufacturing orders in six years and firms were pessimistic about future activity for the first time in five years, the IHS survey found.

“The risk remains, therefore, that the euro area’s largest economy will have fallen into technical recession in the third quarter,” Harker said.

The glum data come two days before the G-7 summit, where French President Emmanuel Macron says leaders — including Germany’s Angela Merkel — should discuss ways to stimulate their economies amid fears of a global slowdown.