Eurozone manufacturing PMI climbs to 52.9 as factory growth reaches four-year high

Eurozone factory activity accelerated in September, with the S&P Global manufacturing purchasing managers’ index rising to 52.9 from 52.7 in August. The final reading was also above the preliminary estimate of 52.7 and marked the third consecutive monthly increase. Because any reading above 50 signals expansion, the result showed the sector ending the third quarter with its strongest growth rate since May 2022.

Output strengthened alongside the headline index. The manufacturing output sub-index increased to 53.6 from 53.3, reaching its highest level in 55 months. Reuters reported that demand for investment goods was a major driver, with production of capital goods such as machinery and equipment growing at the fastest rate since the post-pandemic rebound five years earlier. S&P Global linked part of that demand to spending on artificial-intelligence and defence-related equipment.

The improvement was broad across the currency bloc. The Netherlands led the expansion, Germany recorded solid growth, and France, Italy and Spain posted more modest increases. New orders rose at their fastest pace since early 2022, helped by export growth that reached a more than four-and-a-half-year high. The breadth of the expansion supports the view that September’s improvement was not confined to one national economy or a single component of the survey.

The labor and confidence readings also improved. Business confidence climbed to its strongest level since February, while manufacturers increased staffing modestly in September. That followed August’s end to a run of factory job cuts lasting more than three years. The hiring pickup remains limited, but it adds to the evidence of strengthening workloads and a more constructive outlook among producers.

The survey also showed a less comfortable development for the European Central Bank: both input-cost and output-price inflation accelerated during September. Reuters reported that official data due Friday was expected to show eurozone inflation rising to 3.6% from 3.2% in August, which would be the highest since September 2023. Consumer-goods demand remained weak as the higher cost of living continued to restrain household spending, leaving the recovery stronger in investment goods than in consumer-facing manufacturing.

What it means for traders: the 52.9 headline PMI and 53.6 output reading give EUR/USD a firmer eurozone growth backdrop, while faster input and selling-price inflation keep the interest-rate outlook central. Stronger orders, exports and hiring support the activity side of the euro, but renewed price pressure could increase expectations for further ECB tightening. The split between buoyant capital-goods demand and falling consumer-goods demand means traders will need to assess whether industrial momentum can broaden without worsening the inflation outlook.

Attention now turns to Friday’s eurozone inflation data and subsequent ECB communication. Markets will also watch whether export growth remains strong, whether consumer-goods demand stabilizes, and whether September’s modest hiring increase continues. A sustained PMI above 50 with easing price pressure would point to a healthier expansion, while persistent inflation alongside firm activity would keep the focus on the possibility of additional rate increases.