Eurozone Manufacturing PMI Hits Highest Level Since May 2022

The S&P Global Eurozone Manufacturing Purchasing Managers' Index (PMI) reached 52.9 in September, marking its highest level since May 2022. This slight increase from August's 52.7 indicates a strong expansionary trend, with all eight eurozone countries surveyed reporting growth. The Netherlands led the improvements, followed by Ireland and Austria, while Greece and Germany also saw solid expansions. Spain, France, and Italy reported more modest growth.

New orders for eurozone goods surged at the fastest pace since March 2022, driven by robust demand and improved export conditions. The backlogs of work increased for the first time since April, reflecting growing capacity pressure. Eurozone factory employment also saw a slight uptick in September, reversing a three-year decline. Factories increased their purchases of raw materials and intermediate goods, helping to slow the depletion of input stocks.

Despite persistent supply-chain disruptions, bottlenecks showed signs of easing. Business sentiment improved, with surveyed goods producers expressing greater optimism about output over the coming year. However, price pressures intensified, with input costs and output charges rising at sharper rates for the first time in four months. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that manufacturing growth across the eurozone is now at a rate not seen in four and a half years, driven by demand for investment goods such as machinery and equipment.

Williamson also highlighted that while demand for consumer goods continued to fall due to rising living costs, the upturn in manufacturing was strong enough to encourage factories to hire additional staff. The increased cost of living and rising input costs in September could fuel speculation about additional rate hikes from the European Central Bank.