Melanie Debono, Senior European Economist at Pantheon Macroeconomics, has indicated that the PMI data for the service sector in the Eurozone further supports the notion that service sector inflation is likely to decelerate in the coming months, providing a case for the European Central Bank (ECB) to halt rate hikes after September.
Due to a decline in manufacturing activity in Germany, the service sector PMI has fallen below the key level of 50 for the first time in seven months.
Debono mentioned that while the data does suggest an increase in input prices for services in August, potentially indicative of rising wage demands, the rate at which these companies are passing on price hikes to customers remains lower than that seen in July.
Simultaneously, Debono highlighted that while German firms’ decisions to reduce prices in August were milder than those made in July, industrial prices are currently entrenched in a state of deflation.
