Eurozone Business Activity Hits 41-Month High Amid Rising Price Pressures

The Eurozone's business activity reached its fastest pace in over three years in September, according to the latest S&P Global Eurozone Composite PMI. The index climbed to 53.1 from 52 in August, marking its highest level in 41 months. A reading above 50 indicates growth. However, the sharp rise in price pressures may bolster expectations for the European Central Bank (ECB) to maintain a tight monetary policy.

The survey revealed that companies' input costs and selling prices rose at their fastest pace since May, though both remained below recent peaks. Price increases were more pronounced in manufacturing than in services. Chris Williamson, S&P Global's chief business economist, noted that the data suggests inflation is running closer to 4% than the ECB's 2% target. The stronger growth could further fuel expectations of tighter monetary policy.

The PMI data indicates that the Eurozone's GDP is growing at an annual quarterly pace of about 0.4%, with momentum gaining heading into the fourth quarter. The Eurozone services PMI rose to 53 from 51.6, its highest in 10 months, with services activity expanding for a third straight month. Manufacturing output also accelerated. Service providers raised prices at their fastest pace since February 2024, while their costs rose at the quickest rate in four months.

IT-related services were among the strongest performers, boosted by spending on artificial intelligence and growth in professional and business services. Consumer-focused services held up despite higher energy prices, particularly in Spain. All five Eurozone economies covered by the survey recorded growth, the first time this has happened since November. Spain posted the strongest expansion, followed by Ireland, while Germany's recovery accelerated to one of its strongest levels since early 2022. Italy and France recorded more modest growth.