Euro Zone Business Activity Hits 41-Month High Amid Rising Price Pressures

The euro zone's business activity reached its highest level in over three years in September, according to the latest PMI data. The S&P Global Eurozone Composite PMI climbed to 53.1, up from 52 in August, marking a 41-month high. This reading, which indicates growth, suggests that the region's economy is gaining momentum.

However, the data also revealed rising price pressures, with input costs and selling prices increasing at their fastest pace since May. These inflationary trends could strengthen expectations that the European Central Bank will maintain a tight monetary policy. S&P Global’s chief business economist Chris Williamson noted that the data points to inflation running closer to 4% rather than the ECB’s 2% target.

The euro zone services PMI rose to 53 from 51.6, its highest in 10 months, while manufacturing output also accelerated. Service providers raised prices at the fastest pace since February 2024, driven by strong demand in IT-related services, particularly spending on artificial intelligence. Consumer-focused services also held up despite higher energy prices, especially in Spain.

All five euro zone economies surveyed recorded growth for the first time since November, with Spain leading the expansion, followed by Ireland. Germany’s recovery also accelerated, while Italy and France saw more modest growth. Demand for goods and services strengthened, marking the fastest increase in 41 months, with new overseas orders rising at their quickest pace in over four-and-a-half years.