EMU: PMI Manufacturing Final

Highlights

Euro area manufacturing ended the third quarter with a broader recovery, although renewed price pressures complicate the outlook. September’s PMI rose to 52.9, a 52-month high, while the output index reached 53.6, its strongest reading in 55 months. Expansion across all eight surveyed countries suggests that the recovery is becoming geographically widespread.

New orders grew at their fastest pace since March 2022, supported by a second consecutive increase in export orders. This combination indicates strengthening demand, giving manufacturers greater reason to expand production and purchasing. The recovery is also reaching employment, with factory staffing increasing after three years of contraction to July.

However, rising backlogs suggest that demand is beginning to stretch available capacity. Stronger input purchases and slower inventory depletion indicate that firms are preparing to sustain higher activity. Supply delays eased but remained substantial, while accelerating input costs and selling prices reveal a renewed inflationary challenge. Although price pressures remain below May’s peaks, further increases could weaken competitiveness and compress margins.

In summary, the sector is gaining momentum, and sustaining it will require capacity expansion and manageable production costs. These latest updates leaves the RPI at 21 and the RI-P to 25, meaning that economic activities continue to outpace market expectations in the euro area.

Market Consensus Before Announcement

No revision expected from the flash at 52.7.

Definition

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results 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). Released by S&P Global, national data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 89 percent of Eurozone manufacturing activity.

Description

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 ISM manufacturing index in the U.S. and the S&P Global PMIs elsewhere, 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.

The S&P Global PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

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