Source: Markit

Eurozone Service Sector: At 55.9 in August, up slightly from 55.8 in July, the Final Markit Eurozone Services Business Activity Index rose to a three-month high and was above the earlier flash estimate of 55.6. Business activity has now increased throughout the past year.

Growth of business activity remained firmly driven by the big-two nations of France and Germany. Italy and Ireland also reported growth, whereas business activity fell slightly in Spain. The ongoing expansion of the Eurozone service sector was underpinned by a further solid gain in new business during August. Growth of new work accelerated to a four-month high and was much sharper than that signalled by the flash estimate.

The increase in new business in France was the steepest since January 2007 and well above that signalled for the other nations covered by the survey. Rates of expansion accelerated in Ireland and were broadly unchanged in Germany. Italy saw a slight increase in new business following a marked decline in July. In contrast, Spain reported a decrease for the second time in the past three months.

Capacity and employment: Service sector employment rose for the fourth month running in August. After accelerating throughout this period, the rate of job creation was the fastest since April 2008. Germany, France and Italy all reported higher staffing levels. Rates of growth were the fastest since May 2010 and April 2008 in Germany and France respectively. The increase in Italy was only slight, but nonetheless the fastest for two-and-a-half years. Spain and Ireland both reported job losses, with the rate of decline accelerating in the latter.

Outstanding business rose for the seventh successive month in August, with the latest increase the steepest since May. This reflected substantial growth – the sharpest in four years – in France. In contrast, outstanding business declined in the other nations covered by the survey.

Confidence: Eurozone service providers remained optimistic regarding the outlook for business activity in one year’s time. The overall degree of positive sentiment reached a three-month high in August, mainly as a result of the ongoing economic recovery. However, the level of optimism was lower than that signalled by the earlier flash estimate.

Business confidence improved in Germany (highest since December 2003), Italy (three-month peak) and Ireland (highest since June), but eased in France (13-month low) and Spain.

Prices: August saw a marked acceleration in the rate of input price inflation to a 22-month high. Costs have risen for nine successive months, reflecting higher prices for fuel and food products. There were also some reports of increased staff costs.

Germany, France, Italy and Spain all reported steeper rates of cost inflation. Input prices fell again in Ireland, but the decline was slower than in July.

Eurozone service providers lowered their average charges for the twenty-second consecutive month in August, reflecting continued strong market competition. However, the rate of reduction was the weakest during that period. Output prices rose in France and Italy, but fell elsewhere.

Rob Dobson, Senior Economist at Markit said:"The final PMI reading suggests that the service sector recovery held its ground in August, with growth of activity so far in the third quarter in line with that seen on average in Q2. The near-term outlook at the headline level will also be buoyed by the faster expansion in new business, continued job creation and rising confidence amongst service providers. The main concern remains the continued dependence of the recovery on France and Germany, with rates of activity expansion for the big-two still far-and-away above those seen on average elsewhere. The growth profile of the recovery in Italy has slowed noticeably in recent months, while Spain fell back into contraction in August."

The Eurozone Services PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of around 2000 private service sector firms.