An employee in a bakery.
An employee in a bakery.

The growth of private sector activity in the euro zone accelerated in March thanks to the expansion of the services sector, which more than offset the weakness observed in manufacturing, according to preliminary data from the Purchasing Managers Composite Index (PMI). , prepared by S&P Global Market Intelligence.

Specifically, the composite PMI for the euro zone increased to 54.1 points in March from 52 in February, its best reading in ten months, with an increase in the PMI for services to 55.6 points, compared to 53 .7 from the previous month, while the manufacturing PMI worsened to 47.1 from 48.5 in February, a four-month low.

Thus, the euro zone economy is showing new “signs of life” as spring approaches, said Chris Williamson, chief economist at S&P Global Market Intelligence, for whom the survey results equate to growth of GDP of 0.3% in the first quarter, with an equivalent rate of 0.5% in the month of March alone.

“Growth has picked up from lows at the end of last year as recession fears and energy market concerns fade, inflationary pressures ease and unprecedented delays in supply chains seen during the pandemic are replaced by record improvements in supplier delivery times,” he explained.

Likewise, the expert underlined that business confidence in the euro area is currently showing encouraging resilience in the face of new interest rate increases and the uncertainty caused by the recent tensions in the banking sector.

However, Williamson has pointed out that, despite the fact that inflationary pressures continue to moderate, the rate of increase in prices charged for products and services remains one of the highest in the history of the study. “These persistent inflationary pressures, fueled mainly by the service sector and rising wage costs, will cause concern for policy makers, and suggest that further action may be needed to reduce inflation,” he added.

Germany and France

The growth of the activity of the companies of Germany and France, the two largest economies of the European Union (EU), has accelerated in March to maximums of the last ten months.

In the case of Germany, the composite PMI stood at 52.6 points in March, compared to 50.7 the previous month, its highest level in ten months, after the PMI for the services sector rose to 53 .9 integers from 50.9 in February, despite the fact that the contraction in the manufacturing sector worsened, with a reading of 44.4 points, compared to 46.3 the previous month, its worst result in 34 months.

“The German economy took another small step in the right direction in March,” said Phil Smith, an economist at S&P Global Market Intelligence, while acknowledging that the growth rate remained modest due to continued weakness in the manufacturing sector.

As for France, the March composite PMI rose to 54 points from February’s 51.7, its best result in ten months, with the services PMI rising to 55.5 points from 53.1 the previous month, also in ten-month highs, while the manufacturing PMI limited its contraction, with a reading of 47.7 integers, compared to 47.4 in February.

“The second largest economy in the eurozone is showing remarkable resilience in the face of rising interest rates and high inflation,” said Joe Hayes, senior economist at S&P Global Market Intelligence, for whom the French PMI figures suggest that the French GDP will increase again in the first quarter of 2023.

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