Euro area final services PMI to hover around four-year high despite slight easing in August

The flash euro area services and composite PMIs, published last week, were 54.3 and 54.1, respectively - inching back up after the July reading and getting close to the four-year high that was reached in June. A slight decrease is expected for the final release with the Services PMI dropping from 54.3 (flash) to 53.8, and the composite falling from 54.1 (flash) to 53.8. According to the econometric models, these PMI levels would be consistent with GDP growth in the range of 0.45% qoq, close to the Q3 GDP forecast (0 .4% qoq). 

Looking at the regional breakdown, the German services and composite components are each expected to fall one tick to 53.5 and 53.9, respectively. The services component for the euro area is nevertheless expected to remain strong; this comes on the back of stronger domestic demand in Italy and Spain. 

"Even though Germany's Q2 GDP breakdown last week showed slower domestic demand and consumption, we still see potential for upside surprises in the services sector going forward", notes Societe Generale.