Eurozone business activity ended the third quarter on a soft note. Although, at 47.2, the final composite output index was a tick stronger than its flash estimate and 0.5 points above its final August reading, it remained well short of the 50-expansion threshold.

The headline revision reflected a marginally firmer service sector where the 48.4 flash PMI was amended to 48.7, now a full point above its August level but, again, still below the 50-mark. Ominously, new business continued to decline and at the quickest pace since February 2021 as demand spiralled down in both the domestic and overseas markets. Consequently, backlog depletion was the most marked since early 2021 and, although headcount continued to rise, it did so only modestly as business confidence deteriorated to a 10-month low. In addition, September saw the largest increase in input costs in four months in turn ensuring another hike in output prices, albeit by the least since August 2021.

In terms of national composite output indices, the strongest performing member state was Ireland (52.1) which, alongside Spain (50.1), was in positive growth territory. Italy (49.2) was close to stagnation, but activity contracted steeply in both Germany (46.4) and France (44.1).

Today's update leaves Eurozone GDP growth set to fall below zero in the quarter just ended with manufacturing in particular weighing heavily. Nonetheless, with some ominous inflationary signs in the stronger service sector, ECB interest rate cuts remain a long way down the road. Indeed, at 13 and 32 respectively, the region's RPI and RPI-P still show economic activity in general running somewhat ahead of market expectations.

No revisions are expected leaving the headline composite output index at 47.1, up from August's final 46.7.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.