According to Reuters, the stronger activity came even as inflation in the eurozone accelerated more than expected to 3.8% in September from 3.2% in August, driven largely by soaring energy costs. The increase has heightened expectations that the European Central Bank could keep interest rates higher for longer.

The S&P Global Eurozone Services Purchasing Managers' Index rose to 53.0 in September from 51.6 in August, matching its preliminary reading and marking its highest level in 10 months.

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The composite PMI, which combines services and manufacturing, climbed to 53.1 from 52.0, reaching its highest level since April 2023. The reading also marked the strongest quarterly performance for the eurozone since the second quarter of 2022. A reading above 50 indicates expansion.

The survey pointed to strengthening economic momentum as the bloc entered the fourth quarter. Reuters reported that IT-related services were among the strongest areas of growth, supported by increased investment in artificial intelligence as well as continued expansion in professional and commercial services.

Spain remained the strongest-performing major economy in the survey, followed by Ireland. Germany's recovery also accelerated, reaching one of its strongest rates since early 2022. Italy and France, meanwhile, posted more modest growth.

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Services companies reported a faster increase in new business, suggesting that underlying demand remained resilient. Export orders in the services sector also expanded after 39 consecutive months of contraction, Reuters reported.

Combined with the strongest increase in factory orders since early 2022, overall new orders grew at their fastest pace in 41 months. Overseas demand was particularly robust, with export orders rising at their fastest rate in more than four-and-a-half years.

The improvement in activity, however, did not translate into a comparable increase in employment. A slowdown in services-sector hiring offset a modest improvement in factory job creation, resulting in weaker overall employment growth.

Business confidence remained broadly stable despite the stronger activity and mounting inflation concerns.

The survey also highlighted renewed price pressures across the eurozone. Both input costs and prices charged by businesses increased at their fastest pace in four months.

Reuters reported that the renewed acceleration in prices could reinforce concerns that inflation may remain closer to 4% than the ECB's 2% target.

The combination of stronger-than-expected economic activity, rising energy costs and accelerating price pressures is complicating the ECB's monetary policy outlook. Higher bond yields have also increased financial conditions, but have so far done little to significantly weaken business activity.

Markets are currently pricing in more than two ECB interest-rate increases by the middle of next year, reflecting expectations that policymakers may need to respond more aggressively if inflationary pressures persist.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)

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