Eurozone business activity picked up in August, hinting at stronger growth momentum mainly spurred by renewed expansion in France boosted by the Paris Olympics, a key survey showed on Thursday.
However, concerns remained over the longer-term outlook for the single currency area as new orders continued to fall and German business activity contracted for a second consecutive month and by more than expected.
The HCOB Flash Eurozone composite purchasing managers' index (PMI) – a key gauge of the overall health of the economy – jumped to 51.2 in August, a three-month high and up from 50.2 in July.
Any reading above 50 indicates growth, while a figure below 50 shows contraction.
"At first glance, this looks like a pleasant surprise: activity in the eurozone picked up in August," commented Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB).
"But a closer look at the numbers reveals that the underlying fundamentals might be shakier than they appear."
De la Rubia attributed the boost chiefly to a surge in services activity in France "likely linked to the buzz surrounding the Olympic Games."
"It's doubtful this momentum will carry over into the coming months," he warned.
Olympics host France saw economic activity hit a 17-month high of 52.7, up from 49.1 in July – contrasting with Germany whose PMI fell to 48.5 from 49.1 in July, a five-month low.
While services expanded across the eurozone, manufacturing activity continued to slide, hitting an eight-month low of 45.6 from 45.8 in July.
"It's a tale of two worlds," said de la Rubia. "The manufacturing sector remains mired in recession, while the services sector still appears to be growing at a decent clip."
New orders in manufacturing saw their largest fall since the end of last year, outweighing the modest increase in services and new business.
And de la Rubia predicted that as the Olympic boost fades away it was "likely only a matter of time before the struggles of the manufacturing sector start weighing on services too."
Reflecting that prediction, confidence in future output was at its lowest point in 2024, including in both Germany and France.
