Services PMIs (Aug) – 05/09 – for most of this year it has been notable that services PMIs have managed to offset the weakness in manufacturing PMIs in the form of keeping economies afloat. The strength of the services sector has been a major factor behind the hawkishness of central banks in their efforts to contain inflation with prices in this sector proving to be much stickier than other areas of the economy. This thinking appears to be starting to shift after some poor flash PMI numbers a couple of weeks ago.
These numbers saw after a sharp slide in services sector activity in both France and Germany during August to 46.7 and 47.3, with Italy and Spain also set to show a similar slowdown.
The UK also saw a slide to 48.7, in a sign that higher prices were finally starting to constrain consumer spending. These numbers could well be the final piece of the puzzle when it comes to whether the ECB decides to pause its rate hiking cycle, even as August inflation saw an unwelcome tick higher.
