Eurozone composite PMI shows a return to growth for the first time in months

Eurozone composite PMI shows a return to growth for the first time in months

The eurozone is struggling with rising COVID-19 cases and a sluggish vaccine rollout and markets have been growing nervous, but some upbeat economic news emerged on Wednesday.

The flash reading of the IHS Markit eurozone composite purchasing managers index (PMI) showed business activity returned to growth in March, driven by a record gain in manufacturing output. The composite PMI rose from 48.8 in February to 52.5 in March, according to the preliminary reading.

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A rise above 50.0 indicates the first increase in business activity since last September, with the current expansion the biggest on record since last July and second-steepest in the past 28 months, said IHS. The flash eurozone manufacturing PMI output index jumped to 63 from 57.6 in February, and the highest level since June 1977.

The services sector continued to be constrained by the COVID-19 pandemic, with the activity level creeping up to 48 in March from 45.7. Helping out some were spillover effects from strong manufacturing growth, some easing of virus containment measures, and optimism over the coming year. Germany saw the strongest growth, recording the first expansion of activity in six months.

Rising COVID-19 infection rates and new lockdown measures are putting a damper on the outlook for services. “This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers benefit from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restriction,” said Chris Williamson, chief business economist at IHS
Markit, in a press release.

German Chancellor Angela Merkel on Wednesday backed down from plans for a stricter lockdown over the five-day Easter break, as the country battles a third wave of the virus that causes COVID-19. She said closer scrutiny revealed it wouldn’t really be effective over such a short period anyway.

“We must try to slow down the third wave of the pandemic. Nevertheless it was a mistake,” Merkel said, according to German broadcaster DW. “Because at the end of the day, I carry the last responsibility.”

The German economic research group Ifo on Wednesday cut its gross domestic product growth forecast to 3.7% this year, having previously forecast 4.2% growth for the year three months ago. 

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