Euro-zone business activity strengthened sharply in September, defying expectations that higher energy costs and geopolitical disruptions would weigh more heavily on the region’s economy.
The S&P Global Flash Euro Zone Composite PMI Output Index rose to 53.1 in September from 52.0 in August, its strongest reading since April 2023. Economists surveyed by Reuters had expected the index to decline to 51.7. A reading above 50 indicates expansion.
The improvement was broad-based. Services activity rose to 53.0 from 51.6, while the manufacturing PMI held at 52.7. New orders increased at their fastest pace in more than four years, supported in part by stronger exports.
The stronger activity comes despite rising operating costs linked partly to elevated energy prices. Businesses reported higher input costs and passed some of those increases through to customers, adding another inflation consideration for the European Central Bank.
The combination of stronger growth and renewed price pressures could complicate the ECB’s policy outlook. The latest data provide policymakers with evidence that economic activity is absorbing higher costs better than expected while inflation risks remain present.
Markets will now watch incoming inflation and economic data for evidence that September’s acceleration is sustainable and for clues about the timing of further ECB policy moves.
