Eurozone flash PMI points to further growth in March as services take the strain

By Geoffrey Smith 

Investing.com -- The Eurozone economy picked up further in March as a strong service sector compensated for ongoing weakness in manufacturing.

S&P Global's flash estimate of its composite purchasing managers index for the single currency zone rose to 54.1 from 52.0 in February, clearly above the 50 threshold that indicates growth and defying analysts' expectations for a modest slowdown.

The two pillars of the PMI had diverging fortunes, however. While services grew strongly, manufacturing stagnated, continuing to work off a historical backlog of orders that was a legacy of the pandemic. New orders continued to contract, pointing to further weakness ahead. Oxford Economics' Paolo Grignani noted that the manufacturing number was also distorted downward slightly by a sharp improvement in supplier times, as pandemic-driven supply chain problems unwound further.

The Manufacturing PMI fell to 47.1 from 48.5 as a result. The Services PMI, by contrast, rose to a nine-month high of 55.6, with clear pickups seen in both Germany and France, the region's two biggest economies.

"The eurozone economy is showing fresh signs of life as we enter spring, with business activity growing at its fastest rate for ten months in March." S&P Global's Chris Williamson said, adding that the survey is consistent with GDP growth of 0.3% in the first quarter, accelerating to an equivalent rate of 0.5% in March alone.

"Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade," he noted.

However, others pointed out that the survey was completed before a round of nationwide protests in France against President Emmanuel Macron's plans to raise the national retirement age, as well as an announcement of a nationwide transport strike in Germany for Monday. As such, the final readings due on April 1st may be vulnerable to some downward revision.