Eurozone September flash services PMI 53.0 vs 51.5 expectedPrior 51.6Eurozone September flash manufacturing PMI 52.7 vs 52.6 expectedPrior 52.7Eurozone September flash composite PMI 53.1 vs 51.7 expectedPrior 52.0
Following the stronger showings in both France and Germany earlier, the more robust business activity in the overall euro area here was very much expected.
The latest reading signalled a third consecutive
monthly expansion in business activity in the region, with it being the fastest in almost three-and-a-half years.
Solid growth was registered across both the manufacturing
and services categories, with the latter in particular being a key driver of the improvement in September.
The latest rise in output was also broad based across the
different geographies covered by the data. Germany posted
an expansion for the third month running, with the rate of
growth the fastest in just under a year. Meanwhile, France also saw activity increase for the first time in 10 months.
In looking at the details, price pressures remain a key component in tying the data to the ECB outlook. Inflationary pressures intensified in September, with both
input costs and output prices increasing at the sharpest
rates in four months.
The latest rise in input costs was faster than the average for
the year-to-date, but remained softer than the recent peak
seen in May. Similarly,
output prices increased at sharper rates in both monitored
sectors, as well as across Germany, France and the rest of
the Eurozone as a whole.
The more resilient economic growth and rising prices will likely strengthen the case for the ECB to raise interest rates again sooner rather than later. And if anything else, it puts a rate hike in October very much on the table.
That combination is particularly important for the ECB because stronger activity gives policymakers more room to respond to inflation without having to worry quite as much about choking off an already weak economy.
The market pricing now shows the probability of a 25 bps rate hike in October to be at around 48%, up from roughly 45% before the PMI data before today.
This article was written by Justin Low at investinglive.com.