The eurozone economy continued to make steady progress in September, as solid gains in output and new orders supported further job creation. That said, the rate of growth eased to a four-month low.
The final Markit Eurozone PMI® Composite Output Index posted 53.6, down from 54.3 in August and below the earlier flash estimate of 53.9. Following the dip in September, the average rate of expansion over the third quarter failed to accelerate and instead equalled the second quarter’s four-year high.
September saw solid, albeit slower, increases in output at manufacturers and service providers alike, with the rate of growth in the service sector slightly outpacing that achieved by manufacturing. Economic activity expanded across the ‘big-four’ nations and Ireland. (…) Growth also decelerated in Germany, Spain and Italy, but nonetheless remained relatively solid in each of these nations.
There was also better news coming out of France, with growth accelerating to a three-month high in September. The Output Index was also revised up by 0.5 points since the flash reading.
Employment rose for the eleventh successive month in September, despite the rate of jobs growth easing to its weakest since January. Staffing levels were raised in Germany, Spain and Ireland, with Germany the only nation to see an accelerated increase.
Further growth of output and employment is also being signalled for the start of the fourth quarter, as new business continued to rise at a solid pace and backlogs of work rose at the quickest rate since May 2011. New orders rose in all of the nations covered, whereas outstanding business increased in Germany, France, Spain and Ireland, but fell in Italy.
Average input costs rose only marginally in September, with the rate of inflation having slowed sharply since hitting a three-year high in May. The latest easing mainly reflected the steepest drop in manufacturing input costs since January, driven by lower prices for commodities and oil in particular. Service sector cost inflation crept higher. Average selling prices in the eurozone, meanwhile, were unchanged from August.
The Eurozone Services Business Activity Index posted 53.7 in September, a seven-month low and below the earlier flash estimate of 54.0. The headline index has signalled expansion in each of the past 26 months, with the latest rate of growth above the average for that sequence.
The increase in business activity was underpinned by growth in new orders, with the pace of expansion in new work accelerating slightly since August. With backlogs of work also rising at the second-fastest rate in over four years and business optimism† still positive, the expansion in services output is likely to continue in coming months.
Concurrent growth of business activity and new orders was recorded in each of the five nations covered by the survey in September. The steepest expansion of output was registered in Ireland, with Spain in second place following a sharp growth slowdown (nine-month low). Growth also eased in Germany and Italy (both to two-month lows), but ticked higher in France.
The broad-based expansion of business activity across the eurozone service sector encouraged further job creation during September. Employment rose for the eleventh consecutive month, with increases seen in Germany, Spain and Ireland. The rate of jobs growth improved to the fastest since December 2011 in Germany, but slowed in each of the latter two nations. Cuts were recorded in France and Italy.
Average service sector charges in the euro area rose marginally in September, ending an unbroken sequence of decline that started in late-2011. The trend at the eurozone level was mainly driven by Germany, where output prices were raised to the greatest extent for almost three-and-a-half years. Ireland also reported a strong increase, in contrast to reductions in France, Italy and Spain.
Cost pressures stayed relatively subdued in September. Input price inflation accelerated only marginally from August’s six-month low and remained well below the long-run average. Cost increases were signalled in all five of the nations covered by the survey.