Eurozone's Resurgence: August Brings Positive Growth Amidst Inflation Challenges

Eurozone businesses experienced growth in new orders and overall activity in August 2024, the fastest in 15 months, despite enduring export challenges. The HCOB Flash Eurozone Composite PMI rose to 51.1, signifying expansion. Notably, manufacturing showed improvement while service cost inflation increased significantly, raising concerns for the ECB.

August brought encouraging news for the euro zone as businesses reported a rise in new orders for the first time since May 2024. The HCOB Flash Eurozone Composite Purchasing Managers' Index, compiled by S&P Global, reached 51.1, reflecting the highest growth in 15 months, despite persistent export weaknesses.

Manufacturing displayed remarkable recovery, with PMI rates climbing to 50.5 from July's 49.8, moving into expansion territory for the first time in over three years. Although services saw slower growth, the euro zone's dominant sector still held ground with a PMI drop from 51.0 to 50.7. Germany led growth with robust manufacturing expansion.

Despite positive developments, inflation pressures surged in August with input costs escalating. Service sector costs hit their peak since March, a concern for the European Central Bank, poised to possibly adjust rates in December. The ECB closely watches rising inflation as it aims for stability along with slower wage growth.

(With inputs from agencies.)