Eurozone Business Activity Hits 2026 Peak in August

Business activity in the euro area reached its 2026 peak in August, with the S&P Global Flash Composite PMI Output Index rising to 52.1. This growth was primarily driven by the manufacturing sector, which hit a four-year high of 52.8. The surge was fueled by rising demand for AI-related technology, increased defense spending, and precautionary stock building amid supply chain disruptions in the Middle East.

S&P Global Market Intelligence reported that new orders rose at their fastest rate in 40 months, and exports returned to growth for the first time since February 2022. Employment also increased across both manufacturing and services for the first time this year. While the broader region expanded, performance varied by nation; Germany saw its strongest manufacturing performance in over four years, whereas France experienced a deeper contraction in its private sector.

Despite a softening of inflationary pressures to a five-month low, the European Central Bank is expected to maintain a hawkish bias. With inflation at 2.9% in July—exceeding the 2% target—and solid third-quarter GDP growth projected at approximately 0.3%, market indicators suggest a second interest rate hike of the year is likely in September. S&P Global Market Intelligence noted that "it still remains to be seen if this pace of growth can be sustained, not least in light of ongoing supply risks."