Developments in the services sector and its relationship with manufacturing

Magnus Forsells, Neale Kennedy and Lisa Marie Timm

Economic Bulletin Boxes, 2019, vol. 7

Abstract: Euro area growth has weakened, and economic indicators point to slow growth in coming quarters. This mainly reflects the ongoing weakness in international trade – in an environment of elevated global uncertainties – and its impact on the manufacturing sector. Activity levels in the services sector, by contrast, have remained relatively resilient. However, this raises questions about the extent to which there could be spillovers from the manufacturing sector to the services sector in the future. An analysis of the relationship between manufacturing and various sub-groups of the services sector shows that non-market services exhibit a weak co-movement with the cyclical developments in manufacturing. In contrast, market services and business services tend to move with manufacturing, but as yet there is limited evidence that the recent slowdown in manufacturing has been transmitted to these parts of the economy. This is likely to stem from the resilient developments in domestic demand, supported by the very accommodative monetary policy stance, which continues to support labour markets and create favourable financing conditions. JEL Classification: A10, E32

Keywords: business cycles; Growth; sectoral developments (search for similar items in EconPapers)
Date: 2019-11
Note: 339042
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