LONDON Reuters business activity contracted for a second month in August, as demand sank, with customers wary of the deepening cost of living and the gloomy economic outlook curtailing their purchases, according to a survey.
S&P Global's final composite purchasing manager's 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, a lower than a preliminary 49.2 estimate. Anything below 50 indicates contraction.
Chris Williamson, chief business economist at S&P Global, said that a second month of deteriorating business conditions in the euro area adds to the likelihood of GDP contracting in the third quarter.
In August, output fell at an increased rate, with companies and households scaling back expenditures due to 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, which is less than the preliminary estimate of 50.2 and marking its first month below the breakeven level since March 2021.
There was some relief from easing price pressures. Both the input and output price indexes remained elevated, but both fell, with the input index dropping to 72.5 from 74.7, its lowest reading since February.