In the eurozone as a whole, private sector output growth hit a three-and-a-half year high in September, helped by the ramp-up in AI and defence spending, according to the latest PMI survey. The flash reading from S&P Global showed output rose at the fastest pace since April 2023 amid solid expansions in both the series and manufacturing sectors, reflecting high new orders. The composite output index rose to 53.1 in September from 52 in August, indicating faster growth.
Any reading above 50 points to expansion. The services index jumped to 53 from 51.6, marking a 10-month high, while the manufacturing index edged up to 53.4 from 53.3, a four-and-a-half-year high. However, the rate of job creation remained muted as confidence in the year-ahead outlook eased to a three-month low.
Rates of input cost and output price inflation were the strongest since May. Chris Williamson, chief business economist at S&P Global Market Intelligence, said: It’s no surprise to see inflationary pressures on the rise again in September, given the increase in energy prices emanating from the ongoing conflict in the Middle East, but more encouraging is the resilience of economic growth being reported. Accelerating business growth means the flash PMI survey is indicative of GDP rising at a quarterly rate of 0.4%, with order book growth picking up further momentum across both manufacturing and services in September to hint at sustained momentum heading into the fourth quarter.
Manufacturing, spearheaded by Germany, is enjoying its best growth spell for over four years, spurred by rising AI and defence spending, but service sector growth is also perking up to signal a broad-based improvement in the economic growth story. The rate of job creation remains subdued as business confidence continues to be dampened by caution over geopolitics, notably the ongoing impact on energy prices and the cost of living. However, employment has edged higher again in September, up for a second month, to suggest more companies are returning to the jobs market.
The resilience of economic growth amid the headwinds of geopolitical issues and rising prices will likely embolden the European Central Bank to hike interest rates again before the end of the year, adding to the case for rates to rise sooner rather than later to put an October hike very much on the table.
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