S&P Global reported that the preliminary composite Purchasing Managers' Index for the eurozone's manufacturing and services sectors surged to 53.1 in September from 52.0 in August, the highest level since April 2023 and contrary to analysts' expectations of a decline to 51.7. Business activity across the eurozone accelerated at its fastest pace in more than 3 years, supported by overall new orders rising at their fastest rate in over 4 years. The preliminary services PMI climbed to 53.0 from 51.6 in August, the highest in nearly a year, while the preliminary manufacturing PMI held steady at 52.7, unchanged from August, but the output measure, a component used to calculate the composite PMI, edged up to 53.4 from 53.3 the previous month. Businesses faced rising operating costs and input prices, as energy prices remained elevated due to the war between the United States and Iran, although companies were able to pass on some of the cost burden to consumers. On September 10, the European Central Bank decided to raise its policy interest rate by 0.25% to 2.50%, its second hike this year, to curb the surge in inflation caused by energy prices, and warned that price pressures could persist. Meanwhile, financial markets expect the ECB may raise interest rates 3 more times by the end of June next year.
Eurozone composite PMI surged to 53.1, highest in over 3 years, reinforcing expectations the ECB may hike rates 3 more times, pushing yields up.
Stronger-than-expected eurozone PMI plus ECB hike and further-hike expectations strengthen the euro versus the dollar.
