The eurozone private sector expanded in April by the most in nearly a year, as continued weakness in manufacturing activity offset strength in the services sector, S&P Global's preliminary survey results showed on Tuesday.
The comprehensive production index for April was 51.4, up from 50.3 in March. This exceeded economists' expectations of 50.8.
The private sector continued to decline for the nine months through February, but expanded for the second straight month in April. This score marked the largest increase since May last year.
Service sector production increased for the third consecutive month, the fastest pace of expansion since 11 months, while manufacturing production contracted for the 13th consecutive month.
New orders for services increased at the fastest pace since May last year, but orders for industrial products declined at an accelerating pace.
Employment rose for the fourth straight month after two months of modest declines at the end of 2023. The net job creation rate accelerated to its highest level since June last year.
Manufacturing supplier delivery times have improved for the third month in a row, a significant improvement since August last year.
Both input costs and average selling prices accelerated in April. At a composite level, input costs recorded the fastest rise in the past year.
Sales price inflation accelerated from a four-month low in March and is above its long-term average.
Business expectations for the next 12 months have slowed slightly, but are at their second highest level in the past 14 months, according to the survey.
“Our GDP forecast suggests that GDP will expand by 0.3% in the second quarter, both quarter-on-quarter,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “This is consistent with the growth rate measured in the first quarter.”
The PMI data will test the European Central Bank's willingness to cut interest rates in June, as input costs rise on the back of rising oil prices and rising wages. Nevertheless, the ECB is expected to cut interest rates in June, the economist noted.
“However, we do not believe that the central bank will adopt the 'realistic speed' suggested by the ECB's François Villeroy de Galhau. Instead, we would like to see a more cautious approach,” Rubia said. Stated.
Additionally, the study showed that strong growth was also reported outside of France and Germany. Germany returned to growth in April, and France moved closer to stabilization.
Germany's private sector expanded for the first time in 10 months in April, supported by solid growth in services activity.
The flash composite production index for April rose more than expected to 50.5 from 47.7 in the previous month. The measured value was 48.6.
The services PMI rose to 53.3 in April from 50.1 the previous month, marking the highest level in 10 months. Economists had expected the index to rise to 50.6.
The manufacturing PMI rose moderately to 42.2 from 41.9 in March, but was still lower than the expected 42.8.
Driven by renewed expansion in the services sector, France's flash HCOB composite production index rose to 49.9, an 11-month high from 48.3 in the previous month.
Services activity expanded for the first time since May 2023, but accelerating declines in manufacturing production weighed on the overall pace of expansion.
The Services PMI recorded a score of 50.5, its highest score in 11 months. The score was 48 in February. It was expected to rise from 3 to 48.9.
In contrast, the manufacturing PMI fell to a three-month low of 44.9 from 46.2 last month. The expected score was 46.9.
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