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Eurozone PMI at its highest in 41 months. Economic recovery continues
Euro area PMI points to a clearer recovery in services
September brought a better picture of economic conditions in the euro area. Preliminary PMI readings show that the composite index for manufacturing and services rose to 53,1 pkt, the highest in 41 months, since April 2023. For companies and households, this is a sign that activity in the EU economy is still improving, despite a weaker external backdrop.
The services sector was the biggest surprise. The services PMI rose from 51,6 pkt to 53,0 pkt, while economists had expected 51,5 pkt. It was services, not manufacturing, that pushed the index higher. In practice, this means firms in sectors such as transport, retail and consumer services saw stronger demand in September than a month earlier.
Germany played a major role. There, the services index rose from 49,9 pkt to 52,9 pkt. The improvement was also visible in France, although the source data show only a rise from 48,0 pkt. In manufacturing, the improvement was more modest. The euro area manufacturing PMI held steady at 52,7 pkt, the same as in August.
Chris Williamson of S&P Global Market Intelligence said inflationary pressure picked up again in September, partly because of higher energy prices linked to the conflict in the Middle East. At the same time, he stressed the resilience of economic growth. In his view, the pickup in activity could point to quarterly GDP growth of 0,4% and suggest that current trends will continue into the fourth quarter as well.
The report also points to better business sentiment, reflected in higher employment. For the currency market and for people exchanging money, however, there is another important takeaway: if the improvement in the euro area economy continues, there will be more room to discuss further moves by the ECB (European Central Bank) later this year. PMI, or the Purchasing Managers’ Index, measures the health of the economy based on new orders, output, employment, delivery times and inventories. The survey was conducted between 10 and 21 September among about 5000 companies in several euro area countries.
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