Private sector momentum across the eurozone accelerated at its quickest clip in more than three years last month, driven by an unexpected upturn in services activity. The composite Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 53.1 in September from 52 in August, moving decisively above the 50 threshold that separates expansion from contraction. Analysts surveyed ahead of the release had penciled in a modest decline to 51.7, making the latest reading a clear upside surprise.

Both of the currency bloc's largest economies outperformed forecasts. Germany recorded its fastest expansion since October 2025, while France unexpectedly posted its strongest growth in over two years. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said in a statement on Wednesday that manufacturing is enjoying its best spell of growth in over four years, with artificial intelligence and rising defense spending providing meaningful tailwinds, particularly from Germany. He added that the acceleration in services growth points to a broader improvement in economic conditions across the region.

The eurozone has shown greater resilience than anticipated in the face of ongoing Middle East tensions and the associated surge in energy costs. However, doubts persist over how long this durability can last, given that inflation has risen to its highest level in nearly three years and borrowing costs continue to climb. The European Central Bank raised interest rates this month, marking its second hike since the outbreak of the Iran conflict, and markets anticipate further tightening, with another move potentially arriving as soon as October.

The robust economic performance has provided reassurance to policymakers, who have already upgraded their growth forecast for this year to 0.9%. Economic research noted that the eurozone composite PMI survey confirms the economy remains strong despite higher commodity prices and accelerating inflation. These twin factors reinforce the case for another ECB rate increase, with the research house expecting the central bank to deliver what it views as the final hike of the current tightening cycle in December, according to David Powell, Senior Eurozone Economist.

The OECD has also adopted a more optimistic stance on the eurozone's outlook, revising its 2026 growth projection up by 0.2 percentage points to 1% on Wednesday. The organization simultaneously lifted its forecasts for Germany, Italy, and Spain. By contrast, the OECD trimmed its expectations for France, now seeing the bloc's second-largest economy expanding by just 0.4%.