Eurozone Business Activity Reaches Highest Level Since November

Business activity in the eurozone grew at its fastest pace of the year in August, according to preliminary S&P Global Purchasing Managers' Index (PMI) data. The Composite PMI rose to 52.1, up from 52.0 in July and exceeding the Reuters poll expectation of 51.7. Readings above 50 indicate expansion. This growth was driven by a surge in new orders, particularly in the industrial sector, and the first increase in export orders since February 2022. The manufacturing PMI rose to 52.8, marking a four year high, while the services PMI remained stable at 51.7. Employment also increased for the first time this year as industries resumed hiring. While price pressures remain high historically, the rate of increase for input costs slowed to its lowest pace in six months. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted that demand for AI related technology and defense equipment has notably aided production gains in Germany. Given the solid GDP growth and persistent inflation, Williamson suggested that restrictive monetary policies may continue and further interest rate hikes remain possible. A Reuters poll indicated the European Central Bank is expected to implement its second rate increase of the year next month.