Euro Area final Services PMI to hover around four-year high

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 for the final release is nevertheless expected 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 our 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)", says Societe Generale.

Even though Germany's Q2 GDP breakdown last week showed slower domestic demand and consumption, potential for upside surprises is still seen in the services sector going forward.

"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", added Societe Generale.