- Eurozone September final manufacturing PMI 52.9 vs 52.7 prelim
- Prior 52.7
The breakdownEurozone manufacturing ended the third quarter on a stronger footing, with the headline PMI rising to 52.9 in September from 52.7 in August – marking its highest level in more than four years.
Of note, production and new orders both increased at their fastest rates since early 2022 with new order growth reaching its strongest since March 2022.
However, the less comfortable part of the report was inflation. Input cost and output price inflation both accelerated in September, marking the first time in four months that both measures increased at a faster pace.
Meanwhile, supply pressures also remained evident as supplier delivery times continued to lengthen amid logistics disruptions, although delays were less severe than earlier in the year.
Overall, the growth improvement is positive for the euro area outlook but the acceleration in input and output prices complicates the picture for the ECB. The takeaway here is no longer simply that manufacturing is recovering. It is that while new orders are strengthening, price pressures are simultaneously accelerating.
That combination could keep speculation around further ECB tightening alive, particularly if similar price signals appear in the upcoming services and inflation data.
What does the data measure?The manufacturing PMI surveys businesses across areas including output, new orders, employment, purchasing activity, supplier delivery times and inventories. A reading above 50 indicates expansion from the previous month, while below 50 signals contraction.
Why does it matter to markets?Manufacturing is a relatively cyclical part of the euro area economy, making the PMI a useful early gauge of changes in growth momentum. For markets, the important combination here is that factory activity remains resilient while price pressures are also picking up.
How does this fit the broader economic picture?The stronger flash manufacturing PMI reading reinforces a stronger growth picture in September. Overall euro area business activity accelerated while manufacturing output remained near multi-year highs. But at the same time, stronger input and output price inflation means the growth improvement is not necessarily comfortable for the ECB.
What is the potential market impact?Minimal. The final headline is unlikely to generate much reaction by itself if it more or less confirms the preliminary reading. The more important takeaway for the ECB is the combination of continued manufacturing expansion and renewed price pressures, which keeps the possibility of further tightening firmly in the debate.
Current relevance to markets?Moderate. The headline itself should offer little surprise, but the underlying growth and inflation mix matters more given that recent euro area inflation readings have also been running hotter. That keeps the focus on whether stronger activity gives the ECB more room to respond to persistent inflation pressures without significantly damaging growth.
This article was written by Justin Low at investinglive.com.