Eurozone manufacturing PMI climbs to 52.9, a 52-month high, as price pressures build

• Eurozone's final manufacturing PMI for September came in at 52.9, above the preliminary reading of 52.7
• August's reading stood at 52.7

Eurozone manufacturing finished the third quarter on firmer ground, as the main PMI climbed to 52.9 in September from 52.7 in August, the strongest reading in over four years.

Production and new orders expanded at their quickest pace since early 2022, with the growth in new orders reaching its highest level since March 2022.

But the report's less reassuring aspect concerned inflation. Both input cost and output price inflation picked up speed in September, the first instance in four months where both gauges rose more rapidly.

Supply constraints persisted, with supplier delivery times extending further due to logistics disruptions, though the delays were not as acute as earlier this year.

The improvement in growth is good news for the eurozone outlook, but the quicker pace of input and output prices makes the situation more complex for the European Central Bank. The key point is no longer just that manufacturing is in recovery mode; rather, as new orders firm up, price pressures are also ramping up at the same time.

That mix might sustain talk of further ECB tightening, especially if comparable price indicators emerge in forthcoming services and inflation reports.

What the data covers: The manufacturing PMI polls firms on output, new orders, employment, purchasing, supplier delivery times and inventories. A figure above 50 shows expansion from the prior month; below 50 indicates contraction.

Market relevance: Manufacturing is a fairly cyclical sector in the eurozone, so the PMI is a useful early indicator of growth shifts. For investors, the notable mix is that factory activity stays robust even as price pressures increase.

Broader economic context: The stronger final manufacturing PMI reading confirms a firmer growth picture for September. Eurozone business activity overall stepped up, with manufacturing output still close to multi-year peaks. However, higher input and output price inflation means the growth improvement is not necessarily easy for the ECB.

Potential market effect: Low. The final PMI figure alone will probably not spark a strong reaction since it broadly matches the preliminary estimate. The more crucial message for the ECB is the pairing of ongoing manufacturing growth with renewed price pressures, which keeps the prospect of additional tightening squarely in consideration.

Current market relevance: Medium. The top-line number may hold few surprises, but the underlying combination of growth and inflation is more significant, especially as recent eurozone inflation prints have also been elevated. This shifts attention to whether stronger activity provides the ECB greater scope to address persistent price pressures without major harm to growth.