The euro area economy continued its expansionary trend at the end of the third quarter, with the pace of growth even ticking slightly higher to its strongest since May 2024.
That said, the upturn was again a muted one as demand barely improved and employment levels decreased. A pick-up in confidence for the first time since June was nevertheless recorded, while input cost and output charge inflation rates eased.
The seasonally adjusted HCOB Eurozone Composite PMI Output Index increased for the fourth month in a row to 51.2 in September, from 51.0 previously, signaling a further gradual acceleration in output growth across the eurozone private sector. Additionally, the headline measure rose to its highest level since May 2024.
Albeit rising for a ninth straight month and to the strongest extent in almost a year-and-a-half, the expansion in eurozone output was relatively sluggish, once again coming in below the long-run trend rate of the survey (52.4).
With growth of output surpassing that of new business, September survey data signaled a further reduction in backlogs of work across the euro area.
Eurozone companies reported an increase in their operating costs during the latest survey period. However, the rate of inflation slowed and remained below the survey’s historical average.
Looking ahead, private sector firms in the euro area were optimistic of growth in business activity over the coming 12 months.
The HCOB Eurozone Services PMI Business Activity Index increased from 50.5 in August to 51.3 in September, signaling faster growth during the closing month of the third quarter.
The latest data point marked a fourth consecutive survey period in which the index has posted above 50.0 and therefore in expansion territory. September saw a pick-up in demand for services which was notable, at least compared to the trend over the previous 12 months.
That said, new business growth was mild overall and limited to domestic markets, as indicated by a concurrent (and fractionally faster) reduction in new export orders.
As for prices, inflation ticked lower at the end of the third quarter. Input costs and output prices rose at their slowest rates in two and four months, respectively. Lastly, service providers maintained a positive assessment of year-ahead activity prospects, with expectations even rising by a solid degree to an 11-month high.