October 6, 2026
Economic activity in the euro area witnessed a noticeable acceleration during the month of September, recording its highest levels in nearly three and a half years, supported by strong domestic and external demand. On the other hand, rising inflation and energy prices have put new pressure on the European Central Bank, amid growing expectations that it will be forced to maintain a tighter monetary policy.
According to a report published by the Irish Examiner newspaper, citing Reuters, the purchasing managers index for the services sector in the euro zone rose to 53 points in September, compared to 51.6 points in August, recording its highest level in 10 months. The composite index, which combines the services and manufacturing sectors, also rose to 53.1 points, achieving its highest level since April 2023. Readings that exceed the 50-point barrier usually indicate a state of growth in economic activity.
In the same context, Chris Williamson, chief economist at S&P Global Market Intelligence, explained that these indicators indicate GDP growth of about 0.4% on a quarterly basis, with positive momentum rising at the beginning of the last quarter of the year.
In terms of individual country performance, Spain topped the list of eurozone countries in terms of economic performance in September, followed by Ireland, while Germany witnessed an acceleration in recovery that was among the strongest since early 2022. In contrast, both Italy and France recorded growth at more modest levels.
Statistical data showed an acceleration in the growth of new business within the services sector as a main indicator of strong demand, while export orders rose for the first time after a period of contraction that lasted 39 consecutive months. With factory orders growing at the fastest pace since early 2022, total new orders recorded their fastest growth rate in 41 months, and external demand rose at the fastest pace in more than four and a half years. However, the services sector witnessed a slowdown in employment, which partly limited the slight improvement in job creation within factories and thus weakened the pace of overall employment growth.
Despite the economic recovery, the data revealed a strong return to inflationary pressures. The euro zone inflation rate rose to 3.8% in September, compared to 3.2% in August, driven by increased energy costs. These developments have raised concerns that the European Central Bank will be forced to keep interest rates high for a longer period, or even increase them at a pace greater than expected.
The Purchasing Managers’ Index confirmed that input and production prices rose at their fastest pace in four months. Chris Williamson pointed out that renewed price pressures herald the possibility of inflation in the euro zone reaching a level approaching 4%, which represents double the 2% target set by the European Central Bank.
Williamson added that the coincidence of the acceleration of economic growth with the return of inflationary pressures will enhance speculation about the bank moving towards further tightening of monetary policy, at a time when markets are pricing in expectations of more than two interest rate hikes by the European Central Bank by the middle of next year.
