Eurozone business activity grew at its fastest pace in 41 months in September, as a composite PMI of 53.1 beat forecasts and services led the acceleration. Germany and France both strengthened, but rising input costs keep an October rate hike from the European Central Bank in play.
Eurozone business activity accelerated at its fastest pace in over three years this month, confounding expectations for a slowdown, but firms faced a steeper rise in operating costs. The S&P Global flash composite PMI jumped to 53.1 in September from August's 52.0, well above the 51.7 expected in a Reuters poll and its highest reading since April 2023.
Services drive the surprise upturn
The services PMI bounced to 53.0 from 51.6, beating the 51.5 forecast and marking its strongest showing in nearly a year. Manufacturing held at 52.7, edging past the 52.6 forecast though unchanged from August, while the manufacturing output index nudged up to 53.4 from 53.3. Overall new orders surged at their fastest pace in over four years, supported by a further rise in exports.
Growth broadened across the bloc's two largest economies. Germany's composite PMI jumped to 53.8 from 51.8, an 11-month high, as its services sector returned to expansion. France also returned to growth for the first time in 10 months, with its composite reading rebounding largely on the back of services.
Price pressures complicate the picture
To meet the rise in demand, firms took on more staff but faced a jump in input costs, which Reuters attributed to elevated energy prices stemming from the US war with Iran. They were able to pass some of this on to customers, and output prices rose at their fastest pace in four months. Chris Williamson, chief business economist at S&P Global, said the survey pointed to "the resilience of economic growth being reported", according to Reuters.
The European Central Bank raised interest rates earlier this month for the second time this year to quell an energy-driven inflation rise. Williamson added that resilient growth alongside rising prices could embolden policymakers to hike again before year-end, and market pricing now shows the probability of an October hike at around 48%, up from roughly 45% before the data.
Sources: Investinglive RSS Breaking News Feed, ActionForex, Economic Indicators News
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