Flash PMI survey data pointed to steady growth of the eurozone economy at the end of the third quarter. Moreover, faster growth of new work and backlogs of orders point to continued expansion in coming months. Selling prices were meanwhile stable despite sharply reduced commodity prices. France continued to lag the upturn, but saw growth pick up from the near-stagnation seen in August. Growth slowed in Germany and in the rest of the region.
The Markit Eurozone PMI slipped from 54.3 in August to 53.9 in September, according to the preliminary ‘flash’ reading. The latest index nevertheless remained broadly in line with recent readings seen over the past eight months, and pushed the third quarter average to the highest seen since the second quarter of 2011 (the average of 54.0 compares with 53.9 in the second quarter).
Service sector growth outpaced that of manufacturing, albeit by only a small margin, for a tenth successive month despite the rate of expansion slipping back slightly to match that seen in July. Production growth likewise moderated in manufacturing, though remained above the average seen in the year to date.
Further robust expansion is signalled for the start of the fourth quarter, with growth of new orders hitting a five-month high in September. Inflows of new business hit a five-month high in services and held close to August’s 16-month high in manufacturing. The amount of raw materials bought by manufacturers also rose at the fastest rate since February of last year in preparation for increased future production.
The upturn in new business seen across both sectors during the month pushed backlogs of work up to the greatest extent seen since May 2011, suggesting that firms may seek to boost capacity in order to meet the growth in demand.
Employment rose for an eleventh straight month, although the rate of job creation eased to an eight month low as many firms focused on boosting productivity. Rates of job creation slowed in both manufacturing and services, down to seven- and eight-month lows respectively.
Average input costs rose marginally, the rate of increase having slowed markedly since earlier in the summer to the weakest since February, largely on the back of the steepest drop in manufacturing input prices since January. The marked decline in manufacturing costs reflected widespread commodity price falls, especially oil. Input cost inflation in services edged slightly higher.
Average selling prices were meanwhile largely unchanged compared with August. Charges levied for services rose (though only marginally) for the first time since August 2011 in a sign of improved pricing power. Factory gate prices fell, however, dropping for the first time in six months as manufacturers passed lower raw material costs on to customers.
Although growth slowed slightly in Germany in September, the euro area’s largest member state has seen the best quarterly expansion for a year. German growth was again led by the service sector, supported by solid growth in manufacturing. Furthermore, growth of new business hit the highest since November 2013, backlogs of work jumped to the greatest extent since May 2011 and employment rose at the fastest rate since December 2011, pointing to an increasingly sustainable-looking upturn.
In France, the rate of expansion in business activity picked up from the near-stagnation seen in August but remained only modest. Growth accelerated in both services and manufacturing, the latter enjoying the fastest increase in output for one-and-a-half years. Employment fell at the fastest rate for ten months as firms sought to cut capacity and raise productivity.
The rest of the region continued to enjoy faster growth than both Germany and France, despite the pace of expansion easing to a three-month low. Employment growth outside of the two largest countries likewise waned, sliding to an eight-month low.