Eurozone PMI confirms strongest growth in over three years amid rising inflation

The final Eurozone September PMI readings confirmed the strongest growth in over three years, with both services and composite PMIs matching their preliminary estimates. The services PMI held steady at 53.0, up from 51.6 in August, while the composite PMI remained at 53.1, improving from 52.0. This marks the quickest pace of business activity expansion in nearly three-and-a-half years, driven by robust demand conditions throughout the quarter.

Growth was widespread across the region, with both manufacturing and services sectors expanding at faster rates. All five countries with available composite PMI data recorded growth for the first time since November 2022. However, price pressures intensified, with input costs and output charge inflation accelerating sharply, though still below their May peaks. This poses challenges for the European Central Bank (ECB) as consumer prices rose to nearly 4% last month, raising concerns about core inflation.

The PMI surveys, which provide early insights into the Eurozone's economic performance, suggested quarterly GDP growth of around 0.4%. While business activity improved and employment edged higher, rising costs and selling prices indicate that economic resilience may complicate the ECB's efforts to control inflation. A stronger final reading could reinforce expectations of further ECB policy tightening, potentially supporting the euro and increasing European bond yields, but the market impact of these final estimates is likely to be minimal.