In September, the eurozone economy picked up speed and, after a year and a half, finally gave analysts something to cheer about. The HCOB composite business activity index rose to 51.2 from August’s 51.0, marking the best result since May last year.
The services sector made the biggest contribution to this improvement, reaching an eight-month high with an index reading of 51.3, up from 50.5 in the previous month. However, new orders only increased slightly, so there is still a long way to go before reaching previous highs. The long-term average remains higher at 52.4.
Germany played its usual role as the engine of growth, with its composite PMI also reaching a 16-month maximum. Spain stood out with the strongest growth in the eurozone at 53.8. France, on the other hand, reminds us that not all enjoy the celebration: its index remains at 48.1, signaling contraction.
"Compared to the previous month, price hikes were noticeably stronger," Cyrus de la Rubia, chief economist at Hamburg Commercial Bank AG, said.
Still, there are some clouds on the horizon. For the first time since February, the employment level ticked down, albeit slightly. Companies are working through lingering backlogs at the fastest pace in three months.
There is also some relief on the inflation front. Prices for resources and services are not rising as quickly, and inflation in the services sector, which is closely watched by the European Central Bank, has declined but remains above its historical average. Overall, business sentiment improved in September, marking the second-largest rise since July of last year, but eurozone entrepreneurs remain cautious optimists by local standards.
Exports continue to struggle. New export orders have been falling for three and a half years straight, with no end in sight.
According to de la Rubia, the PMI remained in positive territory throughout the third quarter, meaning that GDP for the quarter almost certainly increased. The precise forecast is +0.4% quarter-over-quarter. The achievements could be modest, but as experience shows, the eurozone is adept at celebrating even small victories.
