Eurozone Composite PMI Climbs to 52.1, Manufacturing Activity Reaches 54-Month High
S&P Global’s latest data shows the Eurozone’s composite Purchasing Managers’ Index (PMI) edged up to 52.1 in August from 52.0 in July, marking its highest point in nine months. This indicates continued expansion across the private sector, primarily driven by robust manufacturing growth. The manufacturing output index rose to 53.4, while service sector activity held steady at 51.7, unchanged from July.
Manufacturing Performance Led by Germany’s Output Jump
The manufacturing PMI increased to 52.8, reaching its highest level since May 2022 and reflecting the fastest growth rate in 51 months. Germany, the Eurozone’s industrial powerhouse, recorded manufacturing output growth at its strongest since January 2022, bolstering the overall manufacturing sector performance. Services expanded moderately with steady growth rates. Notably, French service activity contracted further, contrasting with expansion in Germany and other Eurozone countries driving the region’s service sector dynamics.
New Orders and Exports Show Sustained Recovery
August saw steady growth in new orders, surpassing last month’s pace and hitting a 40-month high. New export orders marked the first expansion in four and a half years, underpinned by manufacturing export strength, signaling a pickup in global demand. Service sector exports remained stable throughout the month.
Employment Growth Resumes After Prolonged Decline
Responding to rising output and orders, Eurozone businesses increased hiring in August, ending a downward employment trend that began in 2023. Service sector recruitment was particularly active, while manufacturing employment showed slight growth, breaking a 38-month stretch of job cuts. Employment levels remained steady in Germany but continued to decline in France, with overall workforce gains driven by hiring in other member states.
Supply Chain Pressures Persist Despite Improved Purchasing
Manufacturing purchasing activity experienced an upturn, with input buying rising for the first time this quarter. However, inventories continued to decline, constrained by significantly longer supplier delivery times, which limited restocking efforts. Finished goods stocks saw their largest drop since March, reflecting ongoing supply chain bottlenecks.
Inflationary Pressures Ease But Remain Above Pre-Crisis Levels
Input price inflation slowed to its lowest point since February, with manufacturing cost rises easing to a six-month low. Service sector costs edged up slightly. Output price increases moderated for the third consecutive month, reaching the slowest rate since March. Price growth decelerated in Germany, while France and other Eurozone nations saw a slight uptick.
Business Confidence Shows Divergence Between Manufacturing and Services
Despite improving business activity, sentiment regarding the next 12 months cooled to a three-month low, falling below the historical average. Confidence in the service sector declined further, while manufacturing optimism improved, hitting a six-month peak. German manufacturers were notably upbeat about prospects, whereas confidence remained subdued in France and other Eurozone countries.
Insights from S&P Global’s Chief Business Economist Chris Williamson
Williamson noted that the August expansion suggests the Eurozone’s GDP could grow by around 0.3% in the third quarter. Manufacturing’s strength was supported by increased defense spending and demand for AI-related products. Services benefited from a rebound in tourism, recording their fastest growth in three years, although high prices continue to limit demand. Considering the ongoing expansion alongside persistent inflation, the European Central Bank is likely to maintain a hawkish stance, with further monetary policy adjustments possible.
Context of the PMI Data
S&P Global’s PMI surveys over 5,000 companies across the Eurozone’s major economies, covering manufacturing and services sectors. A reading above 50 indicates expansion, below 50 signals contraction. The flash data reflects about 85% of the final sample and offers an early indication of economic trends; full data will be released in early September.
The August survey highlights sustained economic expansion supported by manufacturing, stable service sector growth with divergent confidence levels, and lingering supply chain constraints affecting inventories and price pressures. These factors contribute to ongoing uncertainty in economic and monetary policy outlooks for the Eurozone.