Anything above 50 indicates expansion, but at this level, Markit said, the
overall picture is one of an economy struggling against multiple headwinds. However, separate
figures showed retail sales rose 1.2% in August from July. And compared with August the previous year, retail sales were 1.9% higher.
"It may be that retail sales were lifted in August by people determined to
enjoy their summer holidays after a difficult year. There may also have been a
boost to retail sales coming from squeezed consumers looking to make the most of
the summer sales in some countries," said Howard Archer, economist at IHS Global
Insight. Markit said that France saw solid declines in both manufacturing production
and service sector activity. The contraction in Italy was centred on the service
sector, as manufacturing output expanded. On Thursday the European Central Bank (ECB) detailed plans to buy assets to
boost the economy. Markit's chief economist, Chris Williamson, said the latest
PMI survey added to pressure for the ECB to expand its asset purchase plan. Meanwhile the Chancellor George Osborne said the weakness in the eurozone was
"probably the greatest immediate economic risk" to the UK. 40% of the country's
exports are destined for the eurozone.
He urged businesses to look further afield, to places such as Asia and South
America. "Too many of our small and middle-sized businesses have felt daunted about
entering into export markets. That's not the case for small and medium-sized
companies for example in Germany," he told the Institute of Director's
conference in London.
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