Eurozone private sector growth picks up but remains "sluggish"

The eurozone private sector saw its fastest growth in almost a year-and-a-half in September, survey results on Friday showed, as a service sector expansion picked up pace.

The Hamburg Commercial Bank composite purchasing managers' index edged up to 51.2 points in September from 51.0 in August. The latest PMI score, which climbed further above the 50-point neutral mark, represented the loftiest reading in 16 months.

The composite PMI, which is a weighted average of the services and manufacturing PMI readings, landed in line with a flash estimate.

"The headline measure rose to its highest level since May 2024," S&P Global said. "Germany was central to the broader pick-up in growth, with its respective composite PMI output index rising to a 16-month high and indicating a moderate expansion. Nonetheless, out of the euro area nations which composite data are available for, Spain saw the strongest increase in private sector business activity during September. Moderate growth was registered in Ireland and Italy, making France the outlier across the currency bloc as output shrank at a faster pace than in August."

S&P Global said the eurozone composite PMI score still only suggests "relatively sluggish" growth, and sits below the long-run average of 52.4 points.

"Limiting the upturn was a muted improvement in new business. While September's rise in new order inflows represented the strongest gains in sales volumes for eurozone private sector companies since May 2024, growth was marginal. Weighing on demand was a decrease in new export orders, stretching the current sequence of contraction in new work from abroad to over three-and-a-half years," S&P Global added.

The services PMI rose to 51.3 points in September from 50.5 in August, hitting an eight-month high, but was below the 51.4-point flash reading.

"September saw a pick-up in demand for services which was notable, at least compared to the trend over the previous 12 months. That said, new business growth was mild overall and limited to domestic markets, as indicated by a concurrent (and fractionally faster) reduction in new export orders," S&P Global commented.

Numbers on Wednesday showed the manufacturing PMI fell to 49.8 points in September from 50.7 in August. This beat the flash estimate of 49.5, however.

The composite PMI features a panel of around 5,000 private sector firms in the eurozone. Responses were collected in the second half of the month.