Key facts
- Euro zone business activity expanded at its quickest pace this year in August.
- The S&P Global Flash Eurozone Composite PMI rose to 52.1, the highest level since November.
- New orders and export orders saw significant increases.
- Manufacturing activity reached a four-year high, while services activity remained steady.
- Employment increased for the first time this year, and price pressures continued to ease.
Euro zone business activity expanded at its quickest pace this year in August, according to a survey released on Friday. The S&P Global Flash Euro zone Composite PMI Output Index rose to 52.1 from July's 52.0, marking the highest level since November and surpassing a Reuters poll forecast of 51.7. Readings above 50 indicate growth.
The survey showed that new orders increased at the fastest rate in 40 months, while export orders grew for the first time since Russia's invasion of Ukraine in February 2022. The manufacturing sector led the expansion, with its PMI climbing to a more than four-year high of 52.8 from 51.9, beating expectations of 51.8. Output growth in factories reached its strongest level in 54 months. Services activity remained steady, with the PMI unchanged at 51.7, defying forecasts for a slowdown.
Overall employment rose for the first time this year, as manufacturers resumed hiring after more than three years, and services employment grew at the fastest pace in eight months. Price pressures continued to ease, with input cost growth slowing to a six-month low and output price inflation reaching a five-month low.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the manufacturing sector was again the standout performer, with services providing support after a weak second quarter. He noted that precautionary stock building was helping the goods-producing sector amid ongoing supply chain disruptions from the Middle East, but also highlighted encouraging signs of rising demand for AI-related tech goods and higher defence spending, particularly benefiting Germany.
Williamson added that with the flash PMI indicating solid third-quarter GDP growth, a return to hiring, and inflation still elevated by historical standards, a hawkish bias is likely to be maintained, and further imminent rate hikes cannot be ruled out.