Euro zone business activity expanded at its fastest pace in 10 months in August, driven by a rebound in manufacturing and a rare pickup in exports, according to preliminary PMI data published Friday.
The S&P Global composite output index climbed to 52.1 from 52.0 in July, exceeding the Reuters poll median forecast of 51.7 and marking the highest reading since November. The euro zone economy grew 0.4% in the second quarter, providing a backdrop for the latest expansion.
Manufacturing activity surged to a more than four-year high of 52.8, up from 51.9 in July and surpassing the poll estimate of 51.8. Factory output growth reached its strongest level in 54 months, while new orders rose at the fastest pace in 40 months. Employment across the sector returned to growth after more than three years of contraction, with services hiring accelerating to an eight-month high.
Services activity held steady at 51.7, defying expectations for a slowdown following July’s rebound. Export orders increased for the first time since Russia’s invasion of Ukraine in February 2022, signaling tentative stabilization in external demand.
Input cost growth slowed to a six-month low, while output price inflation eased to a five-month low, easing some pressure on the European Central Bank ahead of its policy meeting next month. The ECB is expected to deliver its second rate hike of the year, according to a Reuters poll published last week.
Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that manufacturing led the recovery, supported by precautionary stock building amid Middle East supply chain disruptions. He highlighted rising demand for AI-related technology goods and increased equipment demand from higher defense spending, particularly in Germany.
Despite the positive momentum, firms’ year-ahead sentiment remained subdued and below the series average, suggesting caution persists amid elevated inflation by historical standards. The ECB’s hawkish bias is likely to persist, with further rate hikes not ruled out despite easing price pressures.
