Eurozone PMI Hits 41-Month High Amid Broad Growth and Inflation Pressures

The Eurozone private sector experienced a significant growth surge in September, with the PMI Composite reaching its highest level in 41 months. The index climbed from 52.0 to 53.1, while the PMI Services increased from 51.6 to 53.0, marking the strongest performance since last November. This growth was broadly based, with both manufacturing and services sectors showing improvement, and all five countries with available Composite PMI data recording expansion for the first time since November 2022.

Demand conditions strengthened considerably, with overall new business growing at the fastest pace in 41 months and export orders rising at their strongest rate in over four-and-a-half years. Capacity pressures also became more evident, as backlogs increased for the first time since June 2022 and firms continued to add staff, although services hiring growth eased slightly from August.

The stronger growth picture was accompanied by renewed inflation pressure. Composite input costs and output charges accelerated sharply to their fastest rates since May, while services firms raised selling prices at the quickest pace since February 2024. S&P Global Market Intelligence Chief Business Economist Chris Williamson noted that the surveys point to around 0.4% quarterly GDP growth and suggested inflation could be running closer to 4% than the European Central Bank’s 2% target.

With activity, demand, and pricing pressures all strengthening together, the data provides a firmer backdrop for expectations of further ECB tightening.