UBS Economics-European Economic Comment _European PMIs Better momentum in...-118466189

ab24 October 2025Global ResearchEuropean Economic CommentEuropean PMIs: Better momentum in Q4PMIs suggest pick-up in activity & sentiment in early Q4 The Eurozone Composite PMI (survey period 9-22 Oct.) rose one point to 52.2, thanks to improvements in both services and manufacturing sectors, thus exceeding consensus expectations of a broadly unchanged print (51.1). The services PMI rose 1.3 points to a 14-month high of 52.6 (consensus 51.2). The Manufacturing PMI was up 0.2 points to 50, the second highest since June 2022, with the output sub-index rising marginally to 51.1 - thus marking the 8th consecutive month of output expansion. Aggregate new orders strengthened to a 2½ year high, although new export orders continued to contract (albeit at a moderating pace). After falling in September, aggregate employment grew again, thanks to solid gains in services, while manufacturing employment continued to shrink - a process that has now been under way since May 2023. Surprising negatively, expectations of future output (1-year out) weakened to a 5-month low, not least due to a more sober assessment in the services sector. The October Composite PMI of 52.2 compares with a Q3 average of 51.0, thus suggesting a sequential pick-up in sentiment and activity in early Q4. Eurozone Q3 GDP will be released on 30 October. According to our forecast, growth will have stalled in Q3 (0.0% q/q), after 0.6% q/q in Q1 and 0.1% q/q in Q2. However, we think the forecast risk for Q3 is moderately skewed to the upside. Our forecast for Q4 is 0.0%, and based on today's PMIs we see upside risk to this projection as well. Hence we also see upside risk to our Eurozone 2025 GDP forecast of 1.1%Country detail: Germany surprises to the upside, France on the downsideAt the country level, a sharp increase in the Composite PMI in Germany (+1.8 points to a 29-month high of 53.8) contrasted with a 1.3 point decline in France (to an 8-month low of 46.8). The divergence was driven by opposite moves in the Services PMI, while the Manufacturing PMIs in both countries were essentially unchanged. The increase in the German Services PMI was broad-based across sub-components, with much better current activity, a pick-up in employment and a surge in new business. In France, services activity and new business was lower, but employment up. Despite these divergences, business expectations ticked down in both Germany and France. One potential explanation for the weakness in the French PMI could be the impact of the political instability at the start of October on sentiment. The S&P Global press release notes that "in some instances, panel members linked reduced client spending appetites to a volatile domestic political situation." However, the latest INSEE business confidence (released yesterday) painted a different picture, rising one point to 96.7 (vs a long-term average of 100), driven by large increases in manufacturing and retail trade, which offset moderate declines in servi