Euro zone business activity posts surprise upturn in September

In September, business activity in the euro zone experienced a surprising upturn, marking its fastest rate in over three years, according to a recent survey. The S&P Global Flash Eurozone Composite PMI Output Index surged to 53.1 from August's 52.0, surpassing expectations of a decline to 51.7. A reading above 50.0 indicates expansion in activity.

Chris Williamson, S&P Global's chief business economist, noted the resilience of economic growth despite rising inflation due to increased energy prices caused by the Middle East conflict. New orders surged at their fastest pace in four years, driven by a rise in exports. The services and manufacturing sectors both contributed to the expansion.

The services PMI rose to 53.0 from 51.6, its highest in nearly a year, while the manufacturing index remained steady at August's 52.7. Despite the rise in demand, firms took on more staff but faced higher input costs due to energy price increases. The European Central Bank raised interest rates for the second time in a year to curb inflation, warning that price pressures could be long-lasting.

Markets are pricing three more rate hikes by the end of June. The report suggests that despite geopolitical issues and rising prices, economic growth remains robust, potentially prompting the ECB to raise interest rates again before the end of the year, with an October hike now more likely.