LONDON — Euro zone business activity grew at its fastest pace in 16 months in September but new orders stagnated after briefly expanding in August, potentially raising concerns about the sustainability of the bloc’s economic growth, a survey showed.
The HCOB Flash Eurozone Composite Purchasing Managers’ Index, compiled by S&P Global, edged up to 51.2 in September from 51.0 in August, marking the ninth consecutive month of growth. A Reuters poll had predicted a 51.1 reading.
PMI numbers above 50.0 indicate growth in activity, while those below that level point to a contraction.
“The euro zone is still on a growth path. That said, we’re still a long way from seeing any real momentum,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
An index measuring composite new business – demand – dipped to the breakeven point of 50.0 from 50.3.
Services drove the overall expansion, with the sector’s PMI rising to 51.4 from 50.5 in August – the highest reading in nine months and comfortably ahead of the Reuters poll estimate for no change. However, manufacturing lost momentum with its headline index dropping into contraction territory at 49.5 from 50.7 in August.
The survey highlighted a sharp divergence between the bloc’s two largest economies. Germany registered solid growth, with activity expanding at the joint-fastest pace since May 2023. Meanwhile, France saw business activity decline for the thirteenth straight month, with the rate of contraction accelerating to the sharpest since April.
Overall employment levels stagnated in September, ending a six-month run of job creation, as firms responded to the lack of new business growth. Manufacturers continued to cut jobs, while hiring in services slowed to a seven-month low.
Inflationary pressures eased during the month, with both input costs and output prices increasing at slower rates.
Manufacturing input costs decreased for the first time in three months, while services firms reported a high, albeit softer, pace of inflation and raised their prices at the weakest rate since May.
“Cost inflation in the services sector, which the European Central Bank watches closely, has eased slightly but remains unusually high given the fragile economic backdrop.”
The ECB left interest rates unchanged earlier this month and another Reuters poll said the bank was done with cutting.
