The eurozone's October composite PMI rose to a 29-month high; Germany’s robust recovery served as the growth engine, while France remained mired in contraction.

The eurozone economy posted its strongest expansion since May 2023 in October, breaking a streak of sluggish growth over the first nine months of the year. Germany provided substantial impetus to eurozone growth, offsetting France’s weak performance. On November 5, final data compiled by S&P Global showed the eurozone’s October composite PMI rose to 52.5—the highest level in 29 months—driven primarily by Germany’s composite PMI hitting a 29-month high and serving as the regional growth engine, even as France’s composite PMI sank further into contraction territory. Data also revealed that the eurozone’s October services PMI rose to 53.0—the highest in 17 months—and became the main driver of eurozone growth. The business activity index climbed from 51.3 in September to 53.0 in October, marking the highest level in over a year and a half; new orders grew solidly, and sales growth accelerated to a 17-month high. Among major member states, Germany’s services sector recorded its fastest growth in over two years. The pace of new orders reached a two-and-a-half-year high, while employment growth accelerated to its fastest pace in 16 months—indicating that the eurozone’s largest economy has emerged from its prior weakness. However, ongoing political tensions in France continue to dampen consumer sentiment, leaving its services sector in contraction for the 14th consecutive month. Notably, price trends across the eurozone are diverging: input cost inflation eased for the second consecutive month, falling to a three-month low, yet firms adopted more aggressive pricing, pushing output price inflation to its highest level in seven months. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, remarked that these data are unlikely to trouble the European Central Bank. Germany Emerges as the Growth Engine Germany—the eurozone’s largest economy—stood out particularly in October, with its composite PMI rising to 53.9, a 29-month high, providing critical support to regional economic expansion. The services sector proved key to Germany’s growth, with its PMI surging from 51.5 in September to 54.6 in October—the fastest growth in over two years. This sharp rebound not only offset France’s decline but also signaled Germany’s emergence from prior weakness. Nils Mueller, economist at Hamburg Commercial Bank, stated: "Germany’s services economy is regaining its footing after a period of sluggishness. A combination of rising demand, renewed hiring, and enhanced pricing power bodes well for the broader economy—even though firms remain vigilant about external risks and cost pressures." Employment data corroborate this improvement trend. After two consecutive monthly declines, service-sector employment posted its fastest growth since April in October, directly driven by a marked increase in new business. Although business confidence dipped slightly from its 16-month high in September, it remains above historical trend levels—reflecting expectations of improved economic conditions over the next 12 months. While manufacturing remains weak, output growth edged up modestly. Although factory employment continued to decline—and at an accelerating pace—the stabilization of new orders in October (versus declining goods sales in September) represents a relative improvement.

DIW upgrades Germany’s 2026 GDP growth forecast: from 0.5% to 1.2%! Is exports the linchpin?

Wangye Finance News: Germany has finally received some good news! One figure has yanked the German economy back from 'lying flat' to the 'starting line.' On September 2, the German Institute for Economic Research (DIW) raised its 2026 GDP growth forecast for Germany—from 0.5% all the way up to 1.2%, more than doubling the previous projection. Just months earlier, concerns were mounting that Germany might sink into a slump—yet suddenly, talk turned to recovery. This reversal came faster than anyone else’s. Exports—exceeding expectations—have become the safety net. But here’s the question: Is this recovery real—or just another false alarm? What exactly enabled exports to suddenly surge? Can Germany—the so-called 'locomotive of Europe'—really reignite? 01. Germany’s GDP growth forecast rides a rollercoaster! First, let’s lay out the background. In 2025, Germany’s GDP grew by just 0.2%, virtually stagnating. The once-glorious 'locomotive of Europe' has been jokingly dubbed an 'engine that stalled.' High interest rates, high gas prices, and factory relocations abroad have doused cold water on the economy—leaving little room for optimism. Even more surreal has been the whiplash over the past six months: In spring, DIW projected 1.0% growth for 2026; by summer, an energy-price shock slashed that forecast down to 0.5%; now, it’s jumped back up to 1.2%. Within less than half a year, the direction changed twice—and the 2027 GDP growth forecast was likewise revised upward, from 0.8% to 1.0%. With official institutions leading the way in such U-turns, bullish voices have surged accordingly. 02. Exports: Why have they become Germany’s 'lifeline'? As for the reason behind the upgraded GDP forecast, DIW cites just two words: exports. As Wangye Finance News has reported repeatedly, Germany is a quintessential 'export-oriented economy.' Its flagship industries—automobiles, machinery, and chemicals—depend heavily on overseas orders. Order volumes directly determine how healthy—or unhealthy—the economy looks. After several years of consecutive export declines, nerves have remained taut. So the question arises again: Why is Germany suddenly standing tall this time? First, exports 'exceeded expectations'—orders proved more resilient than anticipated. Second, the recent energy crisis turned out to be 'all bark and no bite': its impact on manufacturing was milder than expected—a point DIW itself explicitly acknowledged.

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