The expansion of the euro area manufacturing sector ‘gathered pace’ at the end of the third quarter, on the back of a notable increase in production and new orders, the latest S&P Global Eurozone Manufacturing PMI has revealed.
“September has seen a further encouraging improvement in manufacturing growth across the eurozone, with the rising tide lifting all ships as the upturn has also broadened out to cover all surveyed member states,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence.
“Measured across the euro area, production is rising at a rate not seen for four and a half years as firms boost capacity to meet rising demand.”
Seasonally adjusted PMI
The seasonally adjusted PMI rose to 52.9 in September from 52.7 in August, reaching its highest level since May 2022. The reading remained above the 50.0 threshold, and now stands at a 52-month high, according to the data.
Increases were evident across the euro area, S&P Global noted. All eight euro area countries covered by the survey recorded a manufacturing PMI above 50 for the first time in more than four years. The Netherlands recorded the strongest improvement, followed by Ireland and Austria, while Greece and Germany also recorded solid expansions. Growth was more modest in Spain, France and Italy, however.
PMI Output Index
Elsewhere. the PMI Output Index rose to 53.6 from 53.3 in August, its highest level for well over four years (55 months). New orders increased at their fastest pace since March 2022, with export demand also supporting sales. Orders from foreign customers increased for a second consecutive month, marking the first sustained rise in more than four and a half years.
At the same time, backlogs of work rose for the first time since April and at their fastest rate in almost four and a half years.
Manufacturers responded by increasing purchasing activity and employment. The volume of raw materials and intermediate goods purchased rose at its second-fastest rate since May 2022, while stocks of inputs declined only marginally.
“Order book growth is also now sufficiently strong to encourage factories to take on additional staff, ending the continual loss of factory jobs that had been reported over the prior three years,” Williamson added.
Manufacturers in the euro area still had to contend with supply chain disruption, however, with delivery times lengthening again. However, delays were the least severe since February, suggesting that some supply bottlenecks were beginning to ease.
Business confidence also strengthened, with manufacturers’ expectations for output over the next 12 months rising to a seven-month high, moving further above the long-run average.
‘Rising demand’
“The upturn is being driven by rising demand for investment goods such as machinery and equipment, with output of these capital goods growing in September at a rate not seen since the post-COVID rebound five years ago,” said Williamson. “This reflects higher demand for AI and defence-related equipment in particular.
“Demand for consumer goods continues to fall, however, with the increased cost of living acting as a drag on household spending. It’s therefore worrying to see both input costs and selling prices rising at increased rates again in September, which will fuel speculation about additional rate hikes from the ECB.” Read more here.
