Eurozone business activity grew at the fastest rate for almost four years in March. The Markit Eurozone PMI (purchasing managers' index) rose from 53.3 in February to 54.1 in March, according to the flash estimate based on an expected 85% of usual monthly replies, climbing for a fourth successive month to reach the highest since May 2011.
At 53.3, the average PMI reading for the first quarter was the highest since the second quarter of last year. The upturn in business activity was fuelled by new order growth likewise accelerating further to the highest since May 2011.
The improvement was broad-based by sector. Growth of services business activity and new business both hit the highest since May 2011, accompanied by stronger rates of increase in both manufacturing output and new orders to the highest since May of last year. Growth of new orders for goods exports hit an eight-month peak. Employment growth meanwhile picked up to the fastest since August 2011. Job creation in the service sector held steady at the near four-year high seen in February, while factory headcounts showed the largest monthly improvement since April last year.
Deflationary pressures eased during the month. Average prices charged for goods and services fell at the slowest rate since last July, the rate of decline easing in part due to the need for some firms to pass higher costs on to customers. Input prices showed the largest monthly increase since last July, boosted in part by higher US dollar denominated import prices arising from the euro’s decline as well as higher staff costs.
Manufacturing selling prices and input prices rose for the first time in seven months, albeit up only modestly in both cases. In the service sector, prices charged fell, but the rate of decline was the weakest for nine months as input costs showed the strongest monthly increase since last July.
By country, business activity growth accelerated to the highest for eight months in Germany, with new order growth hitting a nine-month record. German factory output rose at a markedly faster rate, reaching the highest for nearly a year and catching up with the strong pace of expansion seen in services, which hit a six-month high. Input costs meanwhile rose for the first time in four months, pushing up selling prices.
The French PMI surveys signalled an expansion of business activity for a second successive month, albeit with the rate of improvement moderating slightly from February’s 42-month high and running well below that seen in Germany. New order growth gathered pace, however, edging up to the highest since August 2011.
Manufacturing continued to disappoint in France, with output falling for a tenth successive month, leaving the upturn dependent on a further rise in services activity. Elsewhere across the region, business activity rose at the fastest rate since last July, with new order growth accelerating to the fastest since July 2007 and job creation the strongest seen since September 2007.
Chris Williamson, chief economist at Markit, said: The Eurozone's economic recovery gained further momentum in March, with the PMI hitting its highest for almost four years. The improvement provides welcome news to a region awaiting signs that the ECB’s quantitative easing is stimulating the real economy.
"The region’s GDP looks to have expanded by 0.3% in the first quarter, buoyed by a 0.4% expansion in Germany and signs of a long-awaited recovery in France. Although the surveys are signalling a mere 0.2% expansion of the French economy in the first quarter, the euro area’s second-largest economy is seeing its best performance since 2011.
"The survey data therefore indicate that the ECB’s quantitative easing has been started at a time when the Eurozone's economic upturn is already starting to gain traction. This augurs well for the region to enjoy further improvements in business conditions as the year proceeds, helping drive greater business investment and hiring, and thereby ensuring that the recovery becomes sustainable. Worries persist, however, in relation to Greece and Russia, which are a reminder that ongoing recovery is by no means assured.”
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