Germany was the only big-four euro nation to see an expansion in the services sector in August, although even in Germany the growth rate eased back for the third time in four months and registered a seven-month low. Spain continued to record the weakest performance of the big-four, but the pace of contraction eased for the second month running from June's series record. Both France and, in particular, Italy also saw moderations in the rate of decline of their services sectors after record contractions in July.
The pace of decline of new business in Spain remained by far the steepest of the big-four euro area nations, despite moderating from record rates in recent months. The rate of contraction of new business in Italy also slowed from July's record decline while, in France, the rate was broadly unchanged from the previous two months.
Spain's services sector contracted in August as weak demand eroded new orders, activity and employment, but the rate of decline slowed slightly from July, the Purchasing Managers Index showed on Wednesday.
The Markit Research Services PMI index crept back to 39.0 from 37.1 in July, still well below the 50 divide between growth and contraction but less weak than the consensus forecast of 37.
The PMI survey, covering service companies from banks to cafes, showed activity shrinking at a rate that was only slightly slower than the record contraction in June. The worst fall was among companies providing financial and housing-related services, which have been starved of new business as Spanish house sales fall and the global credit crunch keeps lending costs high.
Confidence about business in 12 months' time turned marginally positive from a negative reading in July, but it was still the third weakest reading since the series began in 1999, and 20 percent of the companies reported staff cuts in August.
The German service sector weakened less in August than initially thought, the service sector eased to 51.4 in August from 53.1 in July, showing growth slowing less sharply than the earlier flash estimate of 50.6.
Hotels and restaurants also reported a difficult month as consumers, paying much more this year to cover basic food and energy costs, sought to economise. Businesses grew increasingly worried about market conditions over the next 12 months, pushing August's gauge of business expectations down to 42.8 -- the lowest reading since November 2002 -- from 43.1 in July. They became much more reluctant to recruit staff, with the jobs index at 50.4 showing new hiring offset by job shedding.
Italy's service sector shrank for the ninth month running in August, order levels continued to fall and companies faced persistent cost pressures. However, at 48.5 the Markit/ADACI purchasing managers' index beat economists' expectations given the extent of its rebound from an all-time low for the decade-old series at 45.6 in July, and companies showed some optimism that business would pick up in the medium term.
Despite the broadly gloomy picture, the business expectations sub-index rebounded from July's all-time low of 58.9 to 66.5. Although still below the long-run average of 74.2, this showed a significant upturn in optimism, particularly in the hotel and restaurant and financial services sectors.
The French PMI recovered but by less than expected, rising to 48.0 in August from 47.5 a month earlier. The previously released flash estimate had shown it rising to 48.5.