Eurozone economic activity rises as manufacturing sector leads growth

The Eurozone economy showed unexpected expansion in August, with the S&P Global composite Purchasing Managers' Index (PMI) rising to 52.1 from 52.0 in July. This marks a nine-month high and exceeded analyst expectations of 51.7.

Growth was primarily driven by a dynamic resurgence in the manufacturing sector, which saw its highest growth in over four years. The manufacturing PMI reached 53.4, the highest level in 54 months. This surge is attributed to increased demand for artificial intelligence technologies and defense equipment, alongside the accumulation of precautionary stocks due to Middle East tensions. Notably, German manufacturing production grew at its fastest rate since January 2022.

In contrast, the services sector remained stable at 51.7 points, maintaining a mild upward trend. While the overall economic outlook is positive, performance varied by country; Germany and France performed below expectations, with France seeing further contraction.

Other key indicators include a 40-month high in new orders and the first increase in foreign orders in over four years. The labor market also showed signs of recovery, with businesses engaging in hiring for the first time this year, ending a 38-month decline in manufacturing employment. S&P Global estimates Eurozone GDP growth could be near 0.3% for the third quarter.