Eurozone private sector growth firms as manufacturing rebounds

LONDON (ICIS)–Conditions for the eurozone private sector continued to thaw in March, driven by the strongest reading for manufacturing in almost three years, while the sector slumped deeper into contraction in the UK.

Flash purchasing managers’ index (PMI) data for March showed that both manufacturing and service sectors back on growth footing, despite a drop in new orders, according to data from S&P Global.

The eurozone composite PMI stood at 50.4 compared to 50.2 last month, while manufacturing firmed from 48.9 to 50.7, and services slipped slightly to 50.4 but remained in growth territory. A PMI reading of above 50.0 signifies growth.

Manufacturing sector growth – the first time in two years and the highest level since mid-2022 – comes as UK industrial production sank deeper into contraction territory, falling from 46.9 last month to 44.6 in March.

The decline, driven by global economic uncertainty and potential US tariffs, according to S&P, comes despite a strong rebound in the country’s private sector driven by services. The flash UK composite index for March firmed to 52.0, a six-month high, driven by a surge in service sector activity to 53.2.

“The signal from the flash PMI is an economy eking out a modest expansion in March, consistent with quarterly GDP growth of just 0.1%, but with employment continuing to be cut thanks to concern over costs and the uncertain outlook,” said S&P Global Market Intelligence chief business economist Chris Williamson.

Manufacturing sector output firmed in Germany as the government agreed a huge new spending bill for defence and infrastructure investment, while activity in France fell for the seventh consecutive month.

Eurozone input cost inflation moderated after several months of increases, also softening in the UK despite steeper service sector costs, with the overall level remaining substantially above long-term averages.

Despite more robust German performance compared to France, the extent of the decline in the country has been far more significant, with more ground to be made up, according to Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB).

“Germany outperformed its key European trading partner France in March in both manufacturing output and services activity. Still, if we zoom out and look over the past two years, France’s industry has only contracted by about 1% since early 2023, while Germany’s has dropped by roughly 8%. In this respect, Germany has a lot of catching up potential,” he said. HCOB helps to assemble to eurozone PMI data.