Euro area: PMI Rises in September, but Subcomponents Warrant Caution

The Euro area composite PMI remained broadly stable in September at 51.2, from 51 in August. However, the manufacturing index fell unexpectedly to 49.5, down from 50.7. In contrast, the services PMI rebounded to 51.4 after declining to 50.5 in August. The September PMI survey presented a mixed picture once again. On one hand, the manufacturing index experienced a significant decline of -1.2 points , primarily driven by the output component. More concerning is the decrease in the new orders component, which fell by -2.2 points. This suggests that activity in the manufacturing sector may remain sluggish in the coming months. Unsurprisingly, the employment component has declined to 48.2, down from 49.4. On the other hand, the services PMI recovered to 51.4 following a slight decline in August . The improvement in the new business component and business expectations is encouraging for the sector. But , other components – such as employment expectations and prices charged – are showing signs of weakening. Overall, the resilience of service activities somewhat mitigates the sluggishness observed in the manufacturing sector. Again, the PMI results for September reveal cross-country heterogeneity. Finally, the outcomes of the PMI surveys in Q3 are consistent with our GDP growth scenario . We anticipate that GDP will increase moderately by approximately 0.1% quarter-on-quarter at the very least.