Euro zone business activity accelerated in August as stronger new orders, a manufacturing rebound and renewed export growth pointed to a resilient third quarter, while price pressures continued to ease.
Euro zone business activity expanded at its fastest pace since November in August, supported by stronger new orders, a sharp improvement in manufacturing and a return to export growth, according to the latest S&P Global flash PMI survey.
The S&P Global Flash Eurozone Composite PMI Output Index rose to 52.1 in August from 52.0 in July, beating the Reuters poll forecast of 51.7. A reading above 50 indicates expansion.
The data suggest the euro zone economy has remained resilient despite the ongoing Middle East conflict after expanding 0.4 per cent in the second quarter.
Manufacturing emerged as the strongest driver of growth. The factory PMI climbed to 52.8 from 51.9, its highest level in more than four years and above the 51.8 forecast. Factory output also recorded its strongest growth in 54 months.
New orders, a key measure of demand, increased at their fastest pace in 40 months. Export orders, including trade within the euro zone, also returned to growth for the first time since Russia’s invasion of Ukraine in February 2022.
Services activity remained stable, with the services PMI holding at 51.7 after its rebound in July, defying expectations of a slowdown.
Employment also showed signs of improvement. Overall employment rose for the first time this year, as manufacturers resumed hiring after more than three years. Services employment increased at its fastest pace in eight months.
More from BusinessAt the same time, price pressures continued to ease. Input cost growth slowed to its lowest level in six months, while output price inflation fell to a five-month low, although inflation remains elevated by historical standards.
S&P Global Market Intelligence chief business economist Chris Williamson said manufacturing was again the strongest performer, while services continued to provide support after a weaker second quarter.
The stronger PMI data point to solid third-quarter economic growth and could reinforce the European Central Bank’s cautious stance on interest rates. A Reuters poll last week indicated the ECB is expected to deliver its second rate hike of the year next month.
Despite the improvement in current activity, businesses remained less optimistic about the outlook for the year ahead, with confidence staying below the long-term average.
