Home Economy News Euro zone economy came off the boil in March but still simmering: PMI

Euro zone economy came off the boil in March but still simmering: PMI

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LONDON, April 5 (Reuters) – Businesses across the euro zone ended the first quarter with their weakest expansion since the start of 2017 as snowy weather and a strong currency combined to curb growth in new orders, a survey showed on Thursday.

Wagon trains of German rail operator Deutsche Bahn (DB) are seen at a freight railway station in the western city of Hagen October 6, 2014. REUTERS/Ina Fassbender/File Photo

Although growth remained strong and broad-based – with output expanding in every country covered by the survey – signs of a slowdown were also widespread, with growth in the bloc’s big four economies as well as Ireland all moderating.

Alongside weaker price pressures, the business survey results will likely be disappointing for decision-makers at the European Central Bank as they look to wind down their huge stimulus program in coming months.

IHS Markit’s Final Composite Purchasing Managers’ Index, seen as a good overall indicator of euro zone growth, fell to 55.2 in March from February’s 57.1 and revised down slightly from the flash estimate of 55.3.

That was the sharpest one-month drop in almost six years, but it remains well above the 50 mark separating growth from contraction.

“The euro zone economy came off the boil in March, though continued to run hot. The surveys are still indicative of the economy growing at an impressive 0.6 percent quarterly rate in March,” said Chris Williamson, chief business economist at IHS Markit.

“Some pull-back from the elevated level of the PMI at the start of the year was always highly likely.”

In January, the PMI was at its highest since June 2006. But a Reuters poll last month said growth had already peaked and also predicted economic expansion of 0.6 percent last quarter.

The euro EUR= has gained over 2 percent against the dollar in the last three months, making the bloc’s exports more expensive, while several blasts of cold weather in Europe have also hit activity.

“Some of the loss in growth momentum also appears to have been the result of temporary factors, such as bad weather and short-term capacity constraints,” Williamson said.

A sub-index measuring new orders, which includes trade within the euro area, fell to a 14-month low of 55.0 from 56.3.

Mirroring a slump in the manufacturing PMI released on Tuesday, the index covering the bloc’s dominant service industry fell to a seven-month low of 54.9 from 56.2, just shy of the 55.0 flash reading.

Services again raised their prices last month, albeit at a slower rate than in February. The output price index fell to 52.1 from 52.9, below an earlier flash reading of 52.4.

Inflation across the bloc rose to 1.4 percent as expected last month, preliminary official data showed on Wednesday, still some distance from the ECB’s 2 percent target.

Editing by Larry King

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