Upbeat preliminary euro area PMI drives Euro higher

Upbeat preliminary euro area PMI drives Euro higher

The euro gained ground against the British pound Friday, following data showing the euro area economy ended the third quarter strongly. The preliminary reading of the euro area composite purchasing manufacturing index (PMI), rose to a four-month high of 56.7 in September, up from August’s 55.7.

The composite PMI measures activity across the private sector in the manufacturing and services sectors. The details of the index highlighted a surge in new orders across both sectors. However, growth in the manufacturing sector continues to outpace that of the services sector, by quite a margin, said IHS Markit, who compiles the index.

Other details in the survey highlighted the future looks bright for the euro zone’s economy. The backlog of work rose sharply, while employment numbers also rose during the early weeks of September.

Any rise in employment is suggestive of confidence over future business, which bodes well for the continuation of the economic recovery across Europe. Indeed, activity in France and German – as measured by the PMI – rose to highs not seen in over six years. Positive details such as these, helped the euro rise further against the British pound.

Price inflation also rose further during September, as capacity remains stretched, meaning consumers must pay more for the goods they want. In the service-sector, prices charged to consumers rose at the fastest pace since May 2017. Meanwhile manufacturing prices charged, hit a joint near-six year high.

A note of caution was detailed over the strong euro, though. Some manufacturers stated the stronger currency would affect their business. To-date, the impact on exports has been minimal.

“The eurozone economy ended the summer with a burst of activity, with the PMI signalling renewed impetus to already-impressive rates of growth of output, order books and employment during September,” said IHS Markit’s chief economist, Chris Williamson. “The survey data point to 0.7% GDP growth for the third quarter, with accelerating momentum boding well for a buoyant end to the year.”

The preliminary PMI measure is based on around 85% of the total responses to the survey. The final data for the month of September will be published on October 2nd and 4th.

By Ilona Billington
Ilona is a freelance writer and editor with over 15 years experience reporting and writing about UK and European economics, real estate, financial markets and central banks.
Invezz uses cookies to provide you with a great user experience. By using Invezz, you accept our privacy policy.