Eurozone Service Sector Growth Hits 41-Month High

The eurozone's service sector saw accelerated growth in September, pushing overall business activity to its highest level in 41 months, according to the final services purchasing managers' index (PMI) released by S&P Global. The services PMI rose to 53.0 from 51.6 in August, matching preliminary estimates and marking the fastest expansion since November 2022. This growth lifted the composite PMI, which averages manufacturing and services activity, to 53.1 from 52.0, indicating a strong end to the third quarter.

Demand increased, and employment levels rose, but inflationary pressures also intensified, with input costs and prices charged climbing at their quickest pace since May. Spain remained the fastest-growing economy, while Germany's growth neared its highest levels since early 2022. Italy and France saw more modest growth. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that IT-related services, particularly AI investments, and consumer-oriented services were key drivers, especially in Spain despite recent energy price hikes.

Williamson added that the data suggests eurozone GDP is growing at a 0.4% quarterly rate. However, the renewed upturn in price pressures hints at inflation running closer to 4% than the European Central Bank's 2% target. This growth acceleration and inflation data may fuel speculation about more aggressive monetary policy tightening.