The euro area’s two largest economies are experiencing the strongest private-sector growth in 10 months, with resilience in services making up for a slump in manufacturing.
(Bloomberg) — The euro area’s two largest economies are experiencing the strongest private-sector growth in 10 months, with resilience in services making up for a slump in manufacturing.
S&P Global’s flash Purchasing Managers’ Index for Germany rose to 52.6 in March from 50.7 a month earlier, a much bigger increase than economists predicted. The French measure jumped to 54, also beating estimates for a slight dip.
Yet manufacturing readings for both countries stayed clearly below the 50 threshold that separates contraction from expansion, a warning sign for those wanting to sound the all clear, particularly in industry-heavyweight Germany.
The “sector lacks momentum right now, with new orders remaining in decline amid a period of caution among clients and excess inventory levels,” S&P Global’s Phil Smith said. Overall though, “the German economy took another small step in the right direction in March.”
An unusually mild winter has provided respite to the region, with Chancellor Olaf Scholz’s advisers saying earlier this week that Germany will avoid an annual contraction in 2023 and France’s central bank revising its growth projections for the year higher.
The PMI data suggest that France will expand in the first quarter, S&P Global said.
“March’s survey signaled the strongest improvement in France’s economy since May 2022, and the first rise in new orders since the middle of last year,” said Joe Hayes, a senior economist and S&P Global.
PMI readings for the euro area and the UK later on Friday are predicted to show growth in both economies, while a US number will probably be below 50.
Data earlier revealed activity in Japan’s service sector edged up to the strongest in almost a decade as the return of Chinese tourists boosted demand.
–With assistance from Mark Evans and Joel Rinneby.
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