Factories Rebound, Services Run Hot: Global PMIs Flash Growth—But Inflation Won’t Let Go

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The Eurozone finally found some factory mojo while services took a breather. Headline manufacturing PMI rose back into expansion at 50.5 (beat 49.5 consensus; prior 49.8), and manufacturing output hit a 41-month high. Services cooled to 50.7 (miss 50.8; prior 51.0), keeping the composite only modestly expansionary. Under the hood, new orders increased for the first time in 15 months (manufacturing orders up for the first time since April 2022), though export orders still fell—domestic demand is doing the heavy lifting. On prices, both input costs and output charges re-accelerated, led by services where input inflation was the strongest since March; manufacturers saw input costs turn positive after five months of declines. Output price inflation rose to a four-month high, supplier delivery times lengthened again, and inventories were run down—an uneven but sticky inflation backdrop that argues against aggressive ECB easing, even as growth improves.

Germany delivered the clearest European inflection. Manufacturing PMI climbed to 49.9 (beat 48.8; prior 49.1) with output jumping to 52.6, its best in 41 months, while services nearly stalled at 50.1 (miss 50.4; prior 50.6). New orders posted their strongest rise since March 2022, but employment fell—especially in factories—and backlogs shrank, suggesting spare capacity remains. Inflation split along sector lines: services costs (wage-linked) pushed input and output prices higher from July’s lows, while manufacturing input prices eased on cheaper energy and a firmer euro, with some savings passed through. Net-net: Germany’s momentum is improving, but it’s “resilient, not roaring,” and the price pressure is coming from services rather than goods.

Across the Channel, the UK remains a tale of two economies. The composite rose to a 12-month high at 53.0 (prior 51.5), powered by services at 53.6 (beat 51.8; prior 51.8). Manufacturing slid further into contraction at 47.3 (miss 48.2; prior 48.0), and factory output stayed just below 50 at 49.5. New business in services grew at the fastest pace since October 2024, but manufacturers reported weaker orders—especially exports—amid “U.S. tariff” uncertainty. Employment fell for an 11th straight month. Inflation re-accelerated: input costs hit the highest since May as payroll, freight and food prices rose; prices charged increased at a “robust” pace, led by services (fastest in three months), while factory-gate prices were the slowest since January. Translation: services-led stickiness in prices narrows the Bank of England’s room to cut without softer data.

Japan is inching toward a better balance. Manufacturing improved to 49.9 (beat 49.2; prior 48.9) with output back above 50 at 50.5, while services remained solid but slower at 52.7 (prior 53.6), lifting the composite to 51.9 (prior 51.6). New business rose to a six-month high, but entirely on the services side; manufacturing orders still fell, and foreign demand declined for a fifth straight month. The inflation mix is awkward: input-cost inflation accelerated across materials, labor, fuel, and transport, but selling-price inflation eased to the lowest since October 2024 as competition and discounting capped pricing power—classic margin squeeze risk even as activity improves.

India is running hot. The composite surged to 65.2 (prior 61.1), with services at a series-high 65.6 and manufacturing at 59.8 (highest since January 2008); manufacturing output hit 64.2. Demand boomed: total new orders rose at one of the fastest rates on record, export orders jumped at the quickest pace since composite data began in 2014, hiring accelerated, and optimism hit the strongest since March. Inflation also heated up: firms reported marked input-cost pressures (notably services wages and raw materials), and output charges rose at the fastest clip since February 2013 as companies passed through costs into prices—margins actually improved, the hallmark of a high-pressure economy.

For broader context, France’s PMIs improved but stayed just under 50 (manufacturing 49.9 vs 48.2; services 49.7 vs 48.5), signaling stabilization rather than expansion. Australia, meanwhile, continued to expand: manufacturing 52.9 (from 51.3) and services 55.1 (from 54.1), reinforcing the sense that APAC momentum is firming—Australia comfortably above 50, Japan edging toward it.

Putting the pieces together, the global growth pulse is rebalancing. Europe’s factories are crawling out of a long slump while services cool from high levels; the UK’s services carry the load as manufacturing lags; Japan’s services lead with tentative factory support; and India is in full-tilt expansion across both sectors. On inflation, the common thread is services: that’s where wage-linked cost pressure is stickiest (Eurozone, Germany, UK), even as goods disinflation fades (Eurozone manufacturing input costs turned positive; Japan’s costs rose but sell-through softened). In policy terms, this is the kind of data that keeps central banks cautious: the ECB gets a soft-landing vibe but can’t ignore re-accelerating services prices; the BoE faces resilient services inflation and a still-weak factory base; the BoJ gets growth but with margin squeeze, complicating any normalization path; and India’s strength argues for vigilance rather than relief.

Trendwise versus prior months and forecasts: Eurozone manufacturing beat and flipped back above 50 while services missed and cooled; Germany’s factory beat contrasted with a services miss; UK services beat as manufacturing missed; Japan beat and improved, though factories remain just shy of expansion; India accelerated sharply across the board. Call it the “humming 50s”: not boomtime, but enough momentum to keep dips shallow—so long as services-side inflation doesn’t sing too loudly.