The eurozone economy expanded in September, with the Composite PMI rising to 51.2, its highest in 16 months, supported by stronger service activity (51.3) and the overall composite index (51.2). Growth was modest, however, and still below the survey's long-run average, underscoring lingering fragility in demand. New business rose at the quickest pace since May 2024, though only marginally, while export orders continued their three-and-a-half-year decline, highlighting reliance on domestic demand.

Geographically, Spain (53.8) led the bloc with robust activity, followed by Germany (52.0) and Italy (51.7), while France (48.1) slipped deeper into contraction. This divergence reflects uneven recovery across the single currency area. Employment softened for the first time since February, though job cuts were fractional, as firms leaned on backlog reductions to sustain output.

Inflationary pressures eased, with both input costs and output prices rising at slower rates. This provided some relief for businesses, which nevertheless face subdued demand conditions. Encouragingly, confidence improved to its second-highest level since mid-2024, with firms being hopeful about future growth, particularly in the services sector.

In summary, the eurozone is managing a cautious recovery as growth is ticking upward and optimism is firming, but weak demand, shrinking exports, and patchy performance across member states continue to restrain momentum. This latest update takes the RPI to 14 and RPI-P to 16, meaning that economic activities continue to outpace the expectations of the euro zone economy.

The composite is expected unrevised from the flash at 51.2 and services is expected unrevised at 51.4.

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.