RTTNews - Eurozone services sector is moving close to stabilization, survey data released by Markit Economics showed Thursday.
The purchasing managers' index or PMI for the euro area services sector rose to 49.9 in August from 45.7 in July. It was also well above the flash reading of 49.5.
A PMI reading above 50 suggests expansion in the sector, while below 50 suggests contraction. The index has now remained below the neutral mark of 50 for fifteen successive months, by far the most sustained period since the series began in July 1998, the Markit said.
According to the report, the rate of contraction in incoming new business eased further in August from February's record low. Confidence amongst Eurozone service providers strengthened to the second greatest extent in the survey history in August. Moreover, optimism reached its highest level since April 2007 and was above the flash estimate.
There was also an improvement in the trend in employment during August. Although staffing levels fell for the fourteenth consecutive month, the rate of job losses was the weakest since last November. August data also pointed to further decreases in average costs and output prices.
Although indexes for activity, new business and employment are still in contraction territory, the record gains in their levels during August combined with improving confidence amongst service providers suggest that the sector will soon follow manufacturing out of recession, Markit Senior Economist Rob Dobson said.
However, concerns remain about the disparities emerging between the member nations, with France and Germany rebounding much faster than Italy, Spain and Ireland.
Setting the appropriate level of monetary stimulus will become increasingly difficult if these national variations become more firmly rooted, Dobson added.
A composite indicator that includes both manufacturing and services sector rose to 50.4 in August, pointing to an expansion in the private sector economic activity for the first time in fifteen months. The index rose from July's reading of 47 and was above the flash estimate of 50. The return to growth of the private sector economy was led by the first gain in manufacturing production since May 2008, Markit said.
Among the 16 nations, the services PMI for Germany climbed to 53.8 in August from 48.1 in July. The latest reading was lower than the earlier flash estimate of 54.1, but the increase marked the largest one-month gain since the series began in June 1997. The reading went above the neutral level of 50 for the first time since September 2008 and indicates a solid month-on-month rise in service sector output.
The Markit/CDAF PMI for France's service sector rose to an eleven-month high of 49.3 from 45.5 in July. New business in the sector increased for the first time in eleven months.
Markit economist for France, Jack Kennedy said, Uncertainty remains as to whether the recovery can be sustained once the pillars of government support begin to be removed and falls in inflation unwind.
The seasonally adjusted Markit/ADACI PMI for Italy stood at 46.4, up from 44.5. Markit said activity fell at the weakest pace since September 2008.
Services activity continued to fall in Spain, but the pace of decline eased in August. The PMI rose to 45.3 in August from 40.8 in July.
Moreover, the NCB Ireland services PMI rose to 46.7 in August from 42.4 in July, indicating that while the rate of contraction was marked, it was the weakest since March 2008.
Also on Thursday, data released by the Eurostat showed that retail sales declined 0.2% in July from June, after staying flat in June. The statistical office revised June's figure from the initial estimate of a 0.2% drop. Year-on-year, sales were down 1.8%, smaller than June's 2% decline. Annual decline for June was revised from a 2.4% fall estimated initially.
Elsewhere, the European Central Bank held its key interest rate at a record low of 1% for the fourth straight month to support the economy amid signs of a recovery.
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