Italian service sector slump continues

While we're expecting the Eurozone services sector as a whole to show growth in August, the Italian sector remains stuck in contraction.

The headline purchasing managers' index number rose from 48.7 to just 48.8.

Economists had forecast an increase 49.4, bringing the economy close to the end of contraction. Any number below 50 implies that the sector is shrinking.

Phil Smith, economist at Markit said:

Although the service sector is yet to join manufacturing in expansion, all indications from August’s survey are that the downturn is nearing a conclusion. Rates of contraction eased across the board, in particular for new business which fell only modestly during the month. Backlogs were also cleared less rapidly, a positive omen for employment trends going forward.

Sales are still being supported through discounts, however, eating further into profit margins. That said, August’s decline was far less marked than in July, with anecdotal evidence suggesting that there were pockets of firms possessing pricing power.