Eurozone Private Sector Logs Biggest Growth In 10 Months

(RTTNews) - Eurozone private sector activity expanded at the fastest pace in ten months in March underpinned by the pickup in manufacturing output and a strong upturn in services activity, thus diminishing fears of recession at the start of the year.

The final composite output index rose to 53.7 from 52.0 in February, results of the latest purchasing managers' survey by S&P Global showed Wednesday. However, the score was below the preliminary estimate of 54.1.

The reading remained above the critical 50.0 threshold for the third successive month and suggested the biggest growth in the private sector since May 2022.

The indicator had slid into a near two-year low in October last year when concerns about the energy crisis were pronounced. The survey showed strong contribution to the overall activity from the service sector. Meanwhile, manufacturing output grew only marginally.

The services Purchasing Managers' Index, or PMI, hit a 10-month high of 55.0 from 52.7 in February. The flash reading was 55.6. There was a further revival in demand but the upturn was curtailed by the fall in export sales. Companies continued to recruit extra workers, sustaining the current sequence of job creation that began just two years ago.

Despite the strong hiring activity, the recent run of backlog depletion came to an end in March as no change in outstanding business was registered.

Businesses remained optimistic on the twelve-month outlook. However, there was a slight softening of sentiment.

Price pressures showed signs of easing in March with a considerable drag from the manufacturing sector.

Input prices in manufacturing fell for the first time since July 2020. By contrast, services firms reported a sharp rise in operating expenses.

Prices charged increased across both sectors. However, the rate of output price inflation eased to a 22-month low.

S&P Global Market Intelligence Senior Economist Joe Hayes said the latest PMI survey will add fresh conviction to the view that, at least for now, the euro area is clear of a recession.

With the turmoil in the banking sector having stabilized, the European Central Bank will raise interest rates by more than is now discounted in the market, Capital Economics economist Jack Allen-Reynolds said.

All of the eurozone nations covered by the PMI survey registered greater activity compared to February. Spain was the top performing country with output rising at the quickest pace in a year-and-a-half.

At the same time, Italy registered the fastest growth in 16 months.

The eurozone's two largest economies, Germany and France, saw growth rates improve to ten-month highs.

Germany's private sector expanded for the second straight month in March supported by the service sector, although there was a moderate growth in manufacturing.

Germany's S&P/BME composite output index posted 52.6, in line with the flash estimate, and up from 50.7 in February. The services PMI advanced to 53.7 from 50.9 in the previous month. The flash score was 53.9.

France's private sector also grew for the second consecutive month in March. The composite PMI improved to 52.7 from 51.7 in the previous month. The score was below the flash 54.0.

Output growth was confined to services firms as factory production declined again. At the same time, the services PMI declined to 53.9 from 53.1 in February. The final reading was below the flash level of 55.5.

Italy's private sector registered a notable expansion in March to hit its biggest growth in 16 months. The composite output index rose to 55.2 from February's 52.2. The services PMI improved more-than-expected to 55.7 from 51.6 in the previous month. The expected score was 53.2.

Spain's private sector expanded for the third successive month in March. The upturn strengthened further, reflecting a notable improvement across manufacturing and service sectors. The composite output index rose to 58.2 in March from 55.7 in February.

The services PMI registered 59.4, up from 56.7 in February. The reading was expected to improve moderately to 57.5. The latest pace of expansion was the most pronounced since November 2021.