Euro Zone Business Activity Hits 41-Month High on Strong Growth

The euro zone's business activity hit a 41-month high in September, according to the latest S&P Global Eurozone Composite PMI. The index rose to 53.1, up from 52 in August, marking the strongest growth since mid-2020. A reading above 50 indicates expansion, and this latest data suggests the region's economy is gaining momentum.

The survey revealed a sharp increase in price pressures, with input costs and selling prices rising at their fastest pace since May. While both metrics remain below recent peaks, the uptick could strengthen expectations for tighter monetary policy from the European Central Bank (ECB). Chris Williamson, S&P Global's chief business economist, noted that the data points to inflation running closer to 4% than the ECB's 2% target.

All five euro zone economies surveyed recorded growth for the first time since November 2022, with Spain leading the way. Germany’s recovery also accelerated, reaching one of its strongest levels since early 2022. The services sector, in particular, showed resilience, with the services PMI rising to 53 from 51.6, its highest in 10 months. IT-related services, driven by AI spending, were among the strongest performers.

Despite the positive signs, business confidence remained weak by historical standards. However, optimism in manufacturing improved to a seven-month high, while service-sector expectations eased. The data suggests euro zone GDP is growing at an annual quarterly pace of about 0.4%, with growth expected to gain further momentum heading into the fourth quarter.