Euro zone business growth hits over 3-1/2-year high despite inflation worries, PMI shows
EWG•Euro zone business activity grew at its fastest pace in nearly 3-1/2 years in September, with the composite PMI rising to 53.1 from 52.0 in August. Inflation accelerated to 3.8%, while markets priced in more than two ECB rate hikes by mid-next year.
1. Growth accelerates
The S&P Global Eurozone Services PMI rose to 53.0 in September from 51.6 in August, while the composite index, which combines services and manufacturing, climbed to 53.1 from 52.0. The composite reading was its highest since April 2023, and the bloc recorded its strongest quarterly performance since the second quarter of 2022.
2. Demand and prices rise
Overall new orders grew at their fastest pace in 41 months, and overseas orders rose at their quickest rate in more than 4-1/2 years. Input and output prices increased at their fastest pace in four months, while euro zone inflation rose to 3.8% from 3.2% in August.
3. Rate outlook
S&P Global Market Intelligence chief business economist Chris Williamson said the PMI surveys pointed to GDP growth at a 0.4% quarterly rate, with momentum accelerating into the fourth quarter. He said renewed price pressures hinted at inflation closer to 4% than the ECB’s 2% target; markets were pricing in more than two ECB rate hikes by mid-next year.
