Business activity in the eurozone rose to a more than three-year high in September — Asharq Al-Awsat

Business activity in the eurozone accelerated in September to its fastest pace in more than three years, despite rising energy costs for companies and households amid the wars in Ukraine and the Middle East. The S&P Global Flash Euro Zone Composite PMI output index rose from 52.0 points in August to 53.1 points in September, Asharq Al-Awsat reports.

The figure was higher than the expectations of economists surveyed by Reuters, who had forecast a decline to 51.7 points. An index reading above 50 points indicates an expansion in business activity. The highest forecast in the survey was 52.6 points.

Growth in manufacturing and services

S&P Global recorded increased output in all regions covered by its statistics. In Germany, Europe’s largest economy, business activity grew strongly in September, although companies experienced intensifying inflationary pressure. In France, the pace of growth became the highest in slightly more than two years thanks to a recovery in demand for services.

At the same time, in the United Kingdom, which is not part of the EU, growth slowed in September amid intensifying inflationary pressure. In the eurozone, new orders grew at the fastest pace in more than four years, supported by a further increase in exports, including trade within the currency bloc.

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Energy costs and ECB policy

The business activity index in the services sector reached its highest level in almost a year, while the manufacturing index remained stable. Companies hired more workers to meet growing demand but faced a jump in input costs due to high energy prices. Businesses passed some of these costs on to consumers.

ING analyst Carsten Brzeski called the PMI figures almost too good to be true and said the eurozone economy’s resilience to the energy shock and supply chain disruptions was a pleasant surprise. He expressed hope that the data would not prove misleading. Capital Economics economist Jack Allen-Reynolds believes that the improvement in the index supports expectations of eurozone GDP growth in the third quarter, despite weak official data for July.

Earlier in September, the European Central Bank raised interest rates for the second time since the start of the year, seeking to curb inflation caused by rising energy prices. The regulator also warned that price pressures could persist for a long time.