According to the report from IHS Markit, euro area economic growth moderated for a second month running in September, marking a further retreat from the 15-year peak recorded in July as shortages of inputs impeded both manufacturing and service sector output. There were also softer rates of expansion in both new orders and employment, while businesses’ output expectations were the least optimistic since February. Meanwhile, inflationary trends moved higher in September, with input prices rising at the joint-fastest rate on record (since July 1998). Output prices subsequently rose at a pace which was only surpassed by those seen in June and July.

After accounting for seasonal factors, the Eurozone PMI Composite Output Index fell to 56.2 in September, down from 59.0 in August and the lowest reading since April. Although indicative of a strong expansion in business activity, it marked a considerable slowdown from the expansions seen between June and August, which were among the fastest in 23 years of data collection.

At the sector level, data showed services activity growing at a faster rate than manufacturing production for the first time since the COVID 19 pandemic started in early-2020, reflecting the latter’s sensitivity to ongoing supply-related issues. Regardless, rates of growth were considerably slower than in August in both sectors.