LONDON (Reuters) -Growth in the euro zone services sector accelerated slightly in September to an eight-month high, although the expansion remained modest with hiring stalling amid a limited improvement in demand, a survey showed.
The HCOB Eurozone Services PMI Business Activity Index rose to 51.3 in September from 50.5 in August, S&P Global reported. That suggested a fourth consecutive month of expansion as readings above 50.0 indicate growth in activity.
“Things are running a little bit more smoothly in the service sector. After almost stagnating in August, business activity picked up more strongly in September,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
The recovery was widespread across most of the bloc, with moderate growth in Germany, Italy and Spain. However, France continued to struggle as political uncertainty weighed on its service providers.
While demand for services increased in the region at the strongest rate since August last year, the improvement was marginal. Foreign demand remained weak, with new export orders falling for the 28th consecutive month.
Despite limited growth in new business, service providers grew more optimistic about future activity, with business confidence reaching an 11-month high in September.
The broader HCOB Eurozone Composite PMI, which includes both services and manufacturing, edged up to 51.2 from 51.0 in August, marking its highest level since May 2024.
Notably, firms reduced their workforces slightly in September, breaking a hiring streak that had lasted since March. This occurred as companies continued to work through backlogs, which declined at the fastest pace in three months.
Price pressures eased somewhat during the month, with both input costs and selling prices rising at slower rates compared to August.
“Although both cost and sales price inflation rates are slightly above the long-term average, they declined in September,” de la Rubia added.
Based on the PMI data, Hamburg Commercial Bank estimates the euro zone economy grew 0.4% last quarter compared to the previous three months. A Reuters poll last month put growth at 0.1%.
(Reporting by Jonathan Cable; Editing by Toby Chopra)
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