Eurozone businesses ended the third quarter on a strong note

Eurozone businesses ended the third quarter on a strong note, growing faster than expected in September, according to a recent survey.

Chris Williamson, chief business economist at IHS Markit, said: “The eurozone economy ended the summer with a burst of activity.”

The IHS Markit composite purchasing managers’ index (PMI) revealed that manufacturers in the region had their best month since early 2011.

The “flash” PMI reading rose to 56.7 in September, up from 55.7 in August. Any reading above 50 indicates growth.

Inflows of new orders showed the largest monthly increase since April 2011.

IHS Markit said in a news release:

“Growth accelerated in both manufacturing and services, albeit with the former continuing to lead the expansion. While service sector activity showed the largest rise since May, the increase in manufacturing output was the greatest since April 2011.The outperformance of manufacturing relative to services also increased to the widest since January 2014.

“The goods-producing sector was again buoyed by rising exports, the rate of growth of which dipped slightly – linked to the recent appreciation of the euro – though remained slightly above the average seen so far this year.”

Chris Williamson, Chief Business Economist at IHS Markit, said that the PMI pointed to third-quarter economic growth of 0.7 percent, higher than the median forecast in a Reuters last week of 0.5 percent growth in Q3.

Commenting on the flash PMI data Mr Williamson said:

“The eurozone economy ended the summer with a burst of activity, with the PMI signalling renewed impetus to already-impressive rates of growth of output, order books and employment during September.

“The survey data point to 0.7% GDP growth for the third quarter, with accelerating momentum boding well for a buoyant end to the year.

“The stronger euro was cited as a concern among manufacturers, but as yet appears to have had only a modest impact on exports. Manufacturing in fact remains a major driver of the current upturn, with export sales playing an important role in pushing order books higher and encouraging further investment in capacity expansion.

“Across both manufacturing and services, job creation was the second-highest seen over the past decade, with manufacturing job gains smashing through prior survey records to register the largest monthly rise in factory headcounts for over two decades.

“Despite the increase in payroll numbers, capacity continues to be stretched, often meaning customers have had to pay higher prices to ensure supply of both goods and services.

“The rise in business activity and accompanying build-up of price pressures will fuel expectations that the ECB is poised to announce its intention to rein back some of its stimulus, reducing its asset purchases in 2018.”