New data from S&P Global released this week revealed that in the Eurozone, business activity took another blow in August as the economic downturn of the bloc extended out from the manufacturing sector to the services sector.

HCOB’s flash Composite Purchasing Manager’s Index (PMI) for the Eurozone, a measure of the bloc’s manufacturing and services activity, fell to the lowest reading since November of 2020, hitting 47.0, compared to 48.6 in July.

The reading, which fell well below the 50-level which separates growth from contraction, came in below the expectations of economists of 48.5.

Manufacturing and services both reported output and new orders falling. For the first time this year, activity in the key services industry fell, dropping to a 30-month low, according to the data.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said, “The service sector of the Eurozone is unfortunately showing signs of turning down to match the poor performance of manufacturing.” 

The data shows that Eurozone output has shrunk for three months in a row now, due to a five-consecutive month long contraction in manufacturing.

S&P said, “Excluding the pandemic, the drop in new business was the steepest since October 2012. New orders for goods continued to fall at one of the sharpest rates since the global financial crisis, accompanied by a second month of deteriorating demand for services.”

Economists are growing worried that there will be a fall in the GDP in the Eurozone in the third quarter, as August sees the bloc’s economy slipping deeper into contraction.

Bert Colijn, senior economist at ING, said, “Another weak PMI for the Eurozone confirms a sluggish economy with recession as a downside risk. Inflation pressures for services remain stubborn as wage pressures continue to be a concern.” 

The report noted that as companies saw deteriorating demand and dimming prospects for the year ahead, hiring managers grew reluctant to expand capacity, which led hiring to nearly stall throughout the bloc.