Eurozone Private Sector Growth Accelerates In April

The euro area private sector economy expanded further in April driven by gains in both manufacturing and service sectors, final data from IHS Markit showed on Wednesday.

The composite output index rose to 53.8 in April from 53.2 in the previous month. The flash reading was 53.7. A score above 50 signals expansion in the sector.

Manufacturing output advanced at a rate little-changed from March’s survey record. At the same time, services output returned to growth following seven months of continuous contraction.

The final services PMI came in at 50.5, up from 49.6 a month ago and the flash score of 50.3.

“Barring any further wave of infections from new variants, Covid restrictions should ease further in the coming months, driving a strengthening of service sector business activity which should gain momentum as we go through the summer,” Chris Williamson, chief business economist at IHS Markit said.

The PMIs may be a less reliable guide to activity growth than normal, but recent progress on vaccinations suggests that the euro-zone economy will start to recover in the second quarter, Jack Allen-Reynolds, an economist at Capital Economics, said.

Germany again led the way in terms of overall growth. Spain showed the strongest expansion for over two years. France and Italy meanwhile registered moderate growth of overall private sector output.

Germany’s private sector growth moderated from March’s 37-month high owing to the combination of a broad stagnation in services activity and a slower expansion in goods production.

The composite output index decreased to 55.8 in April from 57.3 in the previous month. This was also weaker than the preliminary score of 56.0.

A third wave of COVID-19 inflections halted the recovery in Germany’s service sector. The services PMI dropped to 49.9 from 51.5 a month ago. The flash score was 50.1.

The French private sector returned to growth in April as services activity grew for the first time since last August despite the reintroduction of national lockdown restrictions.

The final composite PMI rose moderately to 51.6 from 50.0 in the previous month. The flash reading was 51.7. The services PMI advanced to 50.3 from 48.2 in March and it was slightly below the flash 50.4.

Italy’s private sector expanded for the third straight month in April despite continuing contraction in the service sector. The composite output index fell to 51.2 from 51.9 in March.

At the same time, the decline in services sector deepened in April, with the PMI score falling to 47.3 from 48.6 a month ago. Economists had forecast a reading of 49.8.

Spain’s private sector logged its biggest growth in over two years in April. The composite output index climbed to 55.2 from 50.1 in March. The service sector enjoyed its strongest expansion for nearly a year-and-a-half during April. The index came in at PMI 54.6 versus 48.1 a month ago.

Cost inflation in the euro area intensified in April with latest data showing that operating expenses rose to the greatest degree for ten years, Markit said.

In part reflective of growing market demand, firms were able to pass on some of their increased costs to clients in the form of higher charges. Output prices increased to the greatest degree since February 2018.

Elsewhere, data published by Eurostat showed that producer price inflation accelerated on higher energy prices. Inflation advanced to 4.3 percent in March from 1.5 percent in February. Economists had forecast prices to grow 4.2 percent.

On a monthly basis, producer prices grew 1.1 percent, as expected, after gaining 0.5 percent a month ago.

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