Today, March 21st, the Purchasing Managers Index's “preliminary” forecasts have been released. (PMI) Released in the UK and Eurozone. These datasets are being closely monitored for signs of recovery in key economic sectors such as manufacturing and services. These are original estimates for the month and are subject to revision.
The euro zone economy moved closer to expansion in March, according to preliminary PMI survey data provided today by S&P Global.
The seasonally adjusted HCOB Flash Eurozone Composite PMI Production Index rose from 49.2 in February to 49.9 in March, slightly above the FacSet consensus and very close to the contraction-to-expansion line.
“Although this suggests a decline in production for the 10th consecutive month, the decline in March was slight and the smallest since June of last year, indicating that production activity is largely stable.” “This was the slowest rate of decline in 10 months, and the slowest rate of backlog decline in nine months,” S&P said in a note.
The main driver in the euro area was the services sector, which rose for the second consecutive month in March after six months of decline. The HCOB Flash Eurozone Services PMI Business Activity Index rose to 51.1 from 50.2 in February. In contrast, manufacturing production in March fell for the 12th consecutive month across the euro area, marking yet another month of sharp contraction. The manufacturing PMI production index was 46.8, up from 46.6 in February.
Business conditions continued to vary markedly from country to country. “Continued production declines in France and Germany offset improvements in the rest of the eurozone, pointing to an imbalance in economic conditions,” S&P Global said.
When will the ECB cut interest rates?
Economic confidence for the coming year has improved to a 13-month high on hopes of lower interest rates and easing cost-of-living pressures. However, concerns about the future of the economy remain due to global geopolitical risks and persistent inflation.
“It's time to give up” on the manufacturing recovery in the first quarter, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. However, there is “a glimmer of hope” as companies remain optimistic about future production.
On March 20, European Central Bank President Christine Lagarde said the ECB cannot commit to a path to lower interest rates. But Michael Field, European stock market strategist at Morningstar, said that with inflation falling faster than in the U.S. and the economy unlikely to grow at all in 2024, weakness in the eurozone is likely to push the euro higher. He said that this could become a strength for the region. As a result, pressure on the ECB is increasing. Field says action needs to be taken on interest rates.
UK manufacturing – growing again?
The seasonally adjusted composite S&P Global Flash UK PMI composite production index fell slightly to 52.9 points in March from 53.0 points in February. Although this figure indicates that growth has slowed slightly, it is still above the 50-point threshold, the unchanging threshold that separates growth from contraction.
The UK Services PMI Business Activity Index preliminary report for March was 53.4 points, down slightly from February's 53.8 points.
The British Manufacturing Production Index for March improved to 50.2 points, the highest level in 13 months, from 48.3 in February, indicating that production has returned to growth. The UK Manufacturing PMI for March rose to a near-neutral 49.9 points, up from 47.5 points in February.
“With another strong expansion in business activity, the economy finished its best quarter since the second quarter of last year,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “It shows that GDP will increase by 0.25%, which suggests that.” A solid recovery from the technological downturn in the second half of 2023 is encouraging. ”
He noted that widespread expansion with a sustained increase in service sector activity is “encouraged.” “However, while fears of a recession have subsided, concerns about inflation remain. The stubborn trend of inflation in the services sector continued into March, with a new deterioration in inflation in the manufacturing sector. It got even worse.”
When will the Bank of England cut interest rates?
As of midday today, the Bank of England is expected to keep interest rates on hold despite the fall in inflation in February. Markets are now pricing in not only the ECB and Federal Reserve keeping interest rates on hold on March 20, but also the Bank of England's first interest rate cut in June.
Written by Sara Silano and UK content from Alliance News
