Global Economy
Eurozone PMI Surges to 3.5-Year High, Signaling Strong Q3 Growth Amid Inflation Concerns
Eurozone private sector activity accelerated sharply in September, with the composite PMI hitting 53.1, its highest since April 2023. Services led the surge, new orders rose at the fastest pace in 41 months, and export orders returned to growth after 39 months of decline. Spain and Ireland outperformed, while Germany showed notable improvement. However, rising input costs and output prices at four-month highs could complicate the ECB's policy path as inflation risks remaining above the 2% target.
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Eurozone Private Sector Growth Accelerates to Multi-Year Peak
The euro area's private sector expanded at its fastest pace in three and a half years during September, according to final Purchasing Managers' Index (PMI) data released by S&P Global. The composite index, which combines services and manufacturing, climbed to 53.1 from 52.0 in August, comfortably above the 50 threshold that separates growth from contraction.
Services Sector Drives the Upswing
The services PMI jumped to 53.0, up from 51.6 a month earlier, underscoring the sector's role as the primary engine of the recovery. New business inflows surged at the sharpest rate since February 2023, with the new orders sub-index recording its strongest reading in 41 months. Notably, export orders swung back into expansion territory after 39 consecutive months of decline, signaling improving external demand.
Country-Level Divergence Persists
- Spain and Ireland led the ranking, posting robust growth rates.
- Germany showed a clear acceleration, alleviating some concerns about the bloc's largest economy.
- France and Italy lagged, registering more modest expansion.
GDP Implications and Inflation Watch
S&P Global estimates the data point to approximately 0.4% quarter-on-quarter GDP growth in the third quarter, with momentum carrying into the fourth quarter. However, the report highlights a renewed build-up in price pressures: input costs and output charges rose at their fastest pace in four months. This development could complicate the European Central Bank's (ECB) monetary policy outlook, as inflation may prove stickier than the 2% target.
Market Takeaway
While the PMI beat reinforces the soft-landing narrative and supports equity sentiment, the accompanying inflation signals suggest the ECB may keep interest rates restrictive for longer. Investors will closely watch upcoming CPI releases and the ECB's next policy meeting for guidance.