The rate of eurozone economic expansion remained only modest in April. Output rose at a pace slightly below the average seen in the opening quarter of the year, with only moderate growth seen in both the manufacturing and service sectors.
The final Markit Eurozone PMI® Composite Output Index posted 53.0 in April. This reading was a pip below March’s 53.1 and unchanged from the earlier flash estimate. The index has now signalled expansion in each of the past 34 months.
Growth of incoming new business accelerated to a three-month high in April, but remained below the average seen over last year. Higher order inflows led to a slight accumulation in backlogs of work and encouraged firms to take on more staff.
The ‘big-four’ nations all reported expansions of economic activity in April, with Spain seeing the steepest rate of increase. Output growth in Spain accelerated to a three-month high, despite a slower rate of increase for new business. Italy also saw a modest improvement in its rate of output expansion.
Germany posted a further solid increase in economic activity, although the pace of expansion disappointed by easing to an 11-month low. The news on the demand front was slightly more positive, with inflows of new work rising at a mildly stronger pace.
The French economy expanded for the first time in three months in April, although the rate of growth was barely above the stagnation mark. A modest Markit expansion of service sector activity offset a solid contraction in manufacturing production.
Eurozone employment increased for the eighteenth month in a row during April, with jobs growth improving at manufacturers and service providers alike. Faster rates of increase were signalled in both Germany and Italy. Spain saw a further expansion of workforce levels, albeit weaker than in March. Marginal job creation was registered in France following the prior month’s decline.
April data signalled a marginal increase in average input prices for the first time in four months. Service sector cost inflation accelerated while manufacturing purchase prices fell to the least marked extent in the year so far.
In contrast, the survey’s output price gauge moved lower in April, to signal a mildly faster rate of deflation. Only Germany reported an increase in output charges. France, Italy and Spain all reported reduced selling prices, mainly in response to highly competitive market conditions.
The eurozone service sector recorded further steady but modest growth of business activity at the start of the second quarter. At 53.1 in April, unchanged from March, the final Eurozone Services Business Activity Index remained above the 50.0 no-change mark for the thirty-third successive month.
The rate of growth signalled was one of the weakest signalled since the start of last year and a tick below its earlier flash estimate. There was brighter news on the outlook for the sector, however. Growth of new orders and employment both accelerated and business confidence edged up to a three-month high.
All four of the nations for which April data are available (Ireland data are published on May 5) reported higher levels of business activity and new orders.
The sharpest rates of output growth were registered by Spain and Germany, albeit slower than in the previous month in both cases. France returned to expansion following back-to-back contractions in February and March, while growth in Italy improved from March’s low.
However, there were signs that most nations were sustaining growth of new business through price discounting. Euro area service charges fell for the seventh straight month, with Germany the only one of the ‘big-four’ nations to report an increase.
Service sector employment increased in April, extending the current sequence of jobs growth to one-and-a-half years. Staffing levels were raised further in Germany, Italy and Spain, although only Italy registered a steeper pace of expansion.
France saw employment increase following a reduction in the prior month. Although the rate of job creation at French service providers was only marginal, it was still the fastest since June 2015.
The rate of input cost inflation at eurozone service providers was the joint-highest in the year-to-date during April. However, it remained subdued in comparison to its long-run survey average. Rates of increase accelerated in Germany and Italy, but slowed in France and Spain.
