Euro Zone Business Activity Surges Amidst Olympic Boost

In August, Euro zone business activity showed unexpected resilience, driven by a surge in French services linked to the upcoming Olympics, a survey revealed. This has tempered expectations of further rate cuts from the European Central Bank. However, signs indicate that the boost might be short-lived.

In August, Euro zone business activity surprisingly strengthened, despite firms increasing prices, potentially dampening expectations for further rate cuts from the European Central Bank this year. Notably, this uptick was driven by a sharp rise in French services activity due to the preparation for the Olympic Games.

Conversely, Germany witnessed a second month of business contraction, exceeding initial projections, while Britain, outside the Euro zone, experienced accelerated business activity and eased cost pressures, pointing to steady growth into 2024.

Although the Euro zone services PMI soared to 53.3, indicating improved demand, the manufacturing sector continued to soften. The ECB remains cautious as price pressures persist amid a resilient labor market and steady overall economic activity.

(With inputs from agencies.)