'Glimmer of hope' for Eurozone economy as PMIs edge higher

21st Mar 2024 09:55

(Sharecast News) - Business activity across the Eurozone showed early signs of stabilising in March, according to closely-watched research published on Thursday.

The latest HCOB flash Eurozone composite PMI output index came in at 49.9, a nine-month high and an improvement on February's 49.2.

It was also only marginally below the neutral 50.0 level. A reading below 50.0 indicates contraction, while one above it suggests growth.

Within that, the services PMI business activity index rose to 51.1 from 50.2, while the manufacturing PMI output index nudged up to 46.8 from 46.6.

The surveys also showed that order books had fallen at a reduced rate, while business confidence for the year ahead improved to a 13-month high.

However, the Eurozone manufacturing PMI fell to 45.7 from 46.5. Output also fell sharply in Germany, the bloc's biggest economy, and in France.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: "If you were hoping for a recovery in the manufacturing sector in the first quarter, it's time to throw in the towel. The March PMI confirmed the clear weakness of this sector, which seems to be dominated by the heavyweight Germany.

"However, there is a glimmer of hope. Companies remain optimistic about future production. Moreover, the index of stocks of finished products has risen for the second month in a row."

Ricardo Amaro, lead economist at Oxford Economics, said: "We don't think today's results should be taken too literally, given the PMIs persistent bias since the pandemic.

"The PMIs are, however, still a useful barometer of the direction of travel and tally with the most high-frequency indicators in signalling improving growth momentum, albeit from a low base."

Bert Colijn, senior Eurozone economist at ING, said: "The increase in the PMI is encouraging, but don't expect a material pick-up in GDP growth for the first quarter yet.

"Still, momentum is picking up in the service sector. Business activity is slowly picking up and businesses are becoming more upbeat about the outlook.

"The rate outlook for the European Central Bank hangs for a large part on how wage growth and services inflation develops.

"Muddling through remains the name of the game for the Eurozone economy in the first quarter, but green shoots are emerging. GDP growth has been more or less stagnant since late 2022, but we expect cautious recovery towards the summer."

Data were collected between 11 and 19 March.