The Eurozone Services Business Activity Index rose to 54.4 in August, matching June’s four-year high and slightly above the earlier flash estimate of 54.3.

Markit said the headline services index has now signalled expansion in each of the past 25 months. Ireland and Spain registered the steepest growth of business activity among the nations covered by the survey, although rates of expansion edged lower in both cases. Growth picked up in Germany and Italy, reaching five- and 65-month highs respectively.

 

An expansion of output was registered in France for the seventh month running, although the pace of increase was only moderate and the weakest during that sequence. Higher Eurozone services output reflected a further increase in incoming new business and an accumulation of backlogs of work. However, the rate of expansion in new work received eased slightly to a six-month low.

In contrast, job creation accelerated to its second-fastest pace in over four years, with staff headcounts raised across the ‘bigfour’ national services economies and Ireland. Business optimism† ticked higher in August, recovering from July’s seven-month low. Confidence improved in Germany (four-month high), France (41-month record) and Ireland (three month high). August’s survey highlighted a weakening of cost inflationary pressures in the euro area service sector, with input costs posting the slowest monthly rise since February. The current sequence of decline in selling prices was extended to 45 months, driven by lower charges from French and Italian firms.

Chris Williamson, chief economist at Markit said: “Although global economic worries have intensified in recent weeks, the calming of Grexit fears has led to an improvement in the business environment across the Eurozone, pushing the pace of economic growth to its fastest for just over four years in August. The PMI (purchasing managers' index) is indicating euro area GDP growth close to 0.4% in the third quarter, a solid albeit unspectacular rate of expansion.

“The upturn was stronger than recorded by the flash reading, thanks mainly to stronger growth in Germany and the best performance for over four years in Italy, where the PMIs are both pointing to 0.5% GDP growth in the third quarter. But it is Spain that remains the star performer among the largest Eurozone countries, with the PMI signalling another 1.0% GDP growth spurt in the third quarter.

“The worrying deterioration of growth in France is a major concern, the PMI dropping below the flash reading to signal a near-stagnation of the economy in the third quarter, but the ECB will be reassured by the ability of the Eurozone economy as a whole to withstand recent headwinds. “Policymakers have little scope for complacency, however, as slower growth in the emerging markets and recent financial market volatility as well as a stronger euro have the potential to hit the economy’s performance in coming months.”