- Eurozone September final services PMI 53.0 vs 53.0 prelim
- Prior 51.6
- Eurozone September final composite PMI 53.1 vs 53.1 prelim
- Prior 52.0
The breakdownThe final numbers reaffirm what we already know from the preliminary estimates, as private sector business activity increased at the quickest rate in
nearly three-and-a-half years.
That comes amid a continued improvement in demand conditions in September, completing a full quarter of growth. Overall, the pace of increase ticked up to a 41-month high.
The growth in the region was broad-based as output in both the
manufacturing and service industries expanded at faster
rates at the end of the third quarter. It was a similar story
at the national level, with all five of the countries with
Composite PMI data available recording an expansion – the first since November last year.
That being said, price pressures also continued to intensify further in September. Input
cost and output charge inflation rates accelerated sharply,
although they remained below their recent peaks seen in
May:
That will continue to pose concerns to the ECB on the inflation front, after having already seen consumer prices rise to nearly 4% last month. That will keep the pressure on, as markets grapple with the question on whether core inflation would also start accelerating. If so, that would make it harder for the ECB to treat the current episode as primarily an energy shock.
What does the data measure?The services PMI tracks business activity across the euro area’s services sector, while the composite PMI combines services and manufacturing to give a broader indication of private sector economic activity. A reading above 50 indicates expansion, while anything below 50 points to contraction.
Why does it matter to markets?The PMI surveys are among the earliest monthly indicators of how the Eurozone economy is performing. The September flash numbers were particularly notable because they suggested that growth was accelerating rather than slowing, with the survey estimating that the findings were consistent with quarterly GDP growth of around 0.4%.
How does this fit the broader economic picture?The picture is increasingly one of stronger growth but also stronger inflation pressure. Business activity improved across both manufacturing and services in September, new orders strengthened and employment edged higher. But firms were also reporting faster increases in costs and selling prices.
So instead of weaker growth helping the ECB contain inflation, the latest data suggest that the economy is holding up relatively well even as price pressures build.
What is the potential market impact?A stronger final reading, particularly if accompanied by further evidence of rising prices, would reinforce expectations that the ECB may need to tighten policy further. That would generally be supportive for the euro and could put upward pressure on European bond yields. But as these are the final estimates, it would take a sizable surprise to really move markets. Otherwise, the impact should be largely negligible.
Current relevance to markets?High. The ECB is currently caught between resilient economic growth and a renewed acceleration in inflation, meaning the PMI data feed directly into the debate over further rate hikes.
This article was written by Justin Low at investinglive.com.