March saw the rate of economic expansion in the euro area improve for the first time in three months. The extent of the acceleration was negligible, however, and less marked than that indicated by earlier flash data. Manufacturing saw faster growth of production, but this was mostly offset by a slower rate of output expansion at service providers.
The final Markit Eurozone PMI® Composite Output Index posted 53.1 in March, up from 53.0 in February and below the flash estimate of 53.7. The downward revision of the index between the flash estimate and final reading was mainly driven by France and Italy. These nations combined explained 0.5 points out of the 0.6 point downshift.
The average of the output index over the opening quarter as a whole (53.2) was the weakest registered since the fourth quarter of 2014.
The underlying dynamics of the latest survey were also less positive. Slower growth of new orders at service providers offset a strengthening at manufacturers, while both sectors saw weaker rates of job creation. Measured overall, employment rose at the slowest pace since last September. Price pressures remained on the downside during March. Output charges fell for the sixth straight month, reflecting slower demand growth and rising price competition between firms. Meanwhile, average input costs fell for the third month in a row. A sharp reduction in manufacturing purchase prices contrasted with a mild increase in service sector
By nation, only Ireland and Spain saw faster rates of output expansion in March, keeping them in first and second places respectively in the growth rankings. Both of these countries also saw accelerated increases in new work received and solid job creation. Economic growth in Germany slowed to an eight month low in March, reflecting a relatively modest increase in manufacturing production and a further slowdown in service sector activity growth. German companies continued to add to their payrolls, however. March saw economic growth in Italy slip to a 12- month low, leading to weaker job creation. Meanwhile French output stabilised following February’s decline, but both new business and employment decreased.
March saw the rate of expansion in eurozone services sector business activity moderate further. Growth of output and new business both slowed to 14-month lows, leading to the weakest increase in workforce levels since September 2015.
The final Eurozone Services Business Activity Index posted 53.1 in March, down further from December’s 54.2. The headline index was also below its earlier flash estimate of 54.0.
The drop between the flash and final postings mainly reflected downward revisions in the readings for France and Italy. These nations combined explained 0.7 points of the drop from flash to final.
In the case of France, this was sufficient to move its activity index back below the neutral 50.0 mark, to signal contraction for the second straight month. The level of new business was broadly stable following February’s decline, but employment fell slightly.
Output and new order growth in Italy both eased to the weakest during the respective current 13-month growth sequences. Employment rose for the sixth month running, but only moderately.
Brighter news came from Germany, Spain and Ireland, all of which reported solid expansions of output and new business. Ireland topped the growth rankings and, along with Spain, saw its rate of increase in service sector activity strengthen. Employment rose in all three nations.
The rates of expansion in output and new business eased slightly in Germany, but remained above the averages for the respective current growth sequences. Although the pace of job creation slowed to an eight-month low, it remained above the euro area average.
Input prices at eurozone service providers rose for the seventy-sixth successive month in March, with increases recorded in each of the nations covered by the survey. Despite ticking higher, the rate of inflation remained below its long-run trend.
Service sector charges decreased for the sixth straight month in March, amid reports of stronger price competition between companies. Output charges fell in France and Italy, but rose in Germany, Spain and Ireland.