The eurozone economy showed tentative signs of revival in August, with new orders rising for the first time in 15 months and overall activity reaching its strongest pace since May 2024. The composite PMI edged up to 51.1, marking a modest yet encouraging expansion. Manufacturing led the rebound, with output at 50.5 climbing at its fastest rate in nearly three-and-a-half years and new orders returning to growth after a long contraction. Services, however, lost some momentum, posting slower activity gains at 50.7, albeit, still in expansion territory and slightly above the manufacturing rebound.

Employment rose for a sixth consecutive month, the quickest pace in over a year, though job creation was uneven as services expanded hiring while manufacturing continued to shed workers. Price pressures resurfaced, with input costs and output charges rising at their fastest rates in several months, particularly in services. Meanwhile, backlogs of work continued to fall, suggesting firms still face weak underlying demand despite the uptick in orders. Confidence dimmed, slipping to a four-month low, with firms in France turning pessimistic.

Overall, the eurozone's recovery illustrates that manufacturing is powering growth, but soft services activity, renewed inflationary pressures, and weakening optimism suggest that momentum could prove difficult to sustain, leaving the RPI at minus 22 and the RPI-P at minus 34, indicating that economic activities continue to stay behind economic activities within the zone.

The consensus sees manufacturing at 49.5 in the August flash compared with 49.8 in the July final. Services is expected at 50.7 versus 51.0 in the July final.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The survey, produced by S&P Global uses 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.