Eurozone Business Activity Hits 3.5-Year High Amid Inflation

The Eurozone economy showed unexpected resilience in September, with business activity accelerating at its fastest rate in over three years. According to S&P Global, the Composite PMI rose to 53.1, driven by broad-based expansion in services and manufacturing. Germany led the manufacturing surge, fueled by AI and defense spending, while France recorded its first activity increase in 10 months.

This growth coincided with intensifying inflationary pressures caused by rising energy and fuel costs linked to conflicts in Ukraine and a war between the United States and Iran. In response, the European Central Bank raised interest rates for the second time this year and indicated further hikes are possible. Market data suggests up to three additional rate increases could occur by June 2027, with an October hike remaining a possibility.

In contrast, the United Kingdom's private sector saw growth slow to a three-month low in September. The Composite Output Index fell to 51.7 as new business volumes declined and export sales to EU clients contracted. Employment in the UK continued a two-year decline, though the reduction was marginal. Analysts attribute the UK slowdown to weak consumer confidence and uncertainty surrounding the upcoming autumn Budget.