Eurozone private sector moves closer to stability in March, UK firms

LONDON (ICIS)–The eurozone private sector came close to stabilising this month, driven by a more pronounced return to growth footing for services, but the disparity between a stronger southern Europe and ongoing weakness in France and Germany continued.

Flash eurozone composite purchasing managers’ index (PMI) data for the month showed that business activity in the currency bloc firmed to 49.9, within striking distance of a growth territory after over a year of contraction. A PMI score of above 50.0 signifies growth.

Improving fortunes for the eurozone private sector were driven predominantly by a jump in private sector demand, with the industry’s PMI jumping to 51.1 compared to 50.2 in February.

The manufacturing sector continued to languish in recessionary territory, with a PMI of 46.8 in March compared 46.6 the previous month, the strongest performance in 11 months.

Despite the tepid pace of improvement for Europe’s manufacturing sector, rates of order book volume declines moderated for the fifth consecutive month, according to data from S&P Global.

Conditions were more robust for the service industry, but the pace of growth remains substantially below that seen this time last year, when depressed manufacturing sector conditions were more strongly offset by growth in the sector.

A north/south divide in the eurozone recovery noted last month, with Spain and Italy firmly back on growth footing, France remaining subdued and output continuing to fall in Germany, has continued into March, according to S&P.

“The downturn in France is more widespread than in Germany, with both the manufacturing and services sectors contracting. In Germany, on the other hand, it’s only the manufacturing sector that is showing negative growth, while the services sector is broadly stagnating,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which helps to assemble to PMI data.

“None of this is encouraging, and compared to the eurozone economy as a whole, both economies are laggards,” he added.

The UK’s economic recovery continued during the month but lost pace slightly in March, with composite PMI falling to 52.9 from 53 in February.

Service sector momentum slowed during the month, falling to 53.4 from 53.8 on the back of pressure on household incomes, but manufacturing productivity rallied from 47.5 to 49.9 month on moth, close to stable footing, on the back of customer restocking.

“Further robust expansion of business activity ended the economy’s best quarter since the second quarter of last year. The survey data are indicative of first quarter GDP rising 0.25% to thereby signal a reassuringly solid rebound from the technical recession seen in the second half of 2023,” said S&P Global chief business economist Chris Williamson.

Thumbnail photo: Vehicle production at Volkswagen’s Zwickau, Germany, site (Source: Martin Divisek/EPA-EFE/Shutterstock)