By Daniel Hunter
The Markit Eurozone PMI Composite Output Index rose to a 27-month high in September, signalling the largest rise in activity since June 2011, according to the flash estimate. The flash PMI rose for the sixth consecutive month, up from 51.5 in August to 52.1.
Business activity has now risen for three successive months, and September rounded off the strongest quarterly expansion since the second quarter of 2011.
Higher levels of business activity were driven by faster growth of new business. New orders increased for the second successive month in September, growing at the fastest rate since June 2011.
The upturn was broad-based across services and manufacturing, although only the former saw growth accelerate in September.
Services activity rose for the second month running, expanding at the fastest rate since June 2011. This was fuelled by a second monthly increase in new business placed at service providers. Further expansion is also likely in the coming months as expectations about activity in one year’s time improved to a one-and-a-half year high in the sector.
Manufacturing output meanwhile rose for the third straight month, although the pace of growth slipped from August’s 27-month high. Nevertheless, manufacturing has seen the strongest quarter of growth since the second quarter of 2011 in the three months to September, pulling firmly out of the downturn seen in the previous quarter. New orders in manufacturing likewise rose for a third consecutive month, though growth also eased from August’s recent high.
New export orders for goods rose solidly, growing at a rate only slightly less than August’s 27-month peak.
The upturn in new business inflows meant that backlogs of work stabilised in September, representing the first time that backlogs had not fallen since June 2011.
The improvement in demand signalled by the data on new business also led to fewer job losses. Employment fell marginally across the region, but the decline was the smallest since employment began falling in January 2012.
Service sector employment stabilised, having fallen throughout the prior 20 months. Meanwhile the rate of manufacturing job losses eased to result in only a very modest drop in workforce numbers.
“An upturn in the Eurozone PMI in September rounds off the best quarter for over two years, and adds to growing signs that the region is recovering from the longest recession in its history," Chris Williamson, Chief Economist at Markit said.
“It is particularly encouraging to see the business situation improved across the region. Although the upturn continued to be led by Germany, France saw the first increase in business since early-2012 and elsewhere growth was the strongest since early-2011.
“Employment continued to fall, though it is reassuring that the rate of job losses eased to only a very modest pace, suggesting that employment could start rising again soon.
“The overall rate of growth signalled by the Eurozone PMI remains modest, however, consistent with gross domestic product rising by a meagre 0.2% in the third quarter. While rising inflows of new business bode well for a further upturn in the fourth quarter, policymakers at the ECB will no doubt view it as too early to change their stance on keeping policy on hold for an extended period.”
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