At 54.0 in April, unchanged from the flash estimate, the final
Markit Eurozone PMI (purchasing managers' index) signalled expansion for the tenth successive month and reached
its highest level since May 2011. Growth was again led by the manufacturing
sector, with goods production showing its steepest gain since January. Service
sector business activity rose at the fastest pace for 34 months.
Composite output growth was fastest in Ireland and Spain during April –
reaching eight- and seven-year highs respectively – as inflows of new business
strengthened in both nations. Germany and Italy also saw sharper expansions in
activity and new orders.
France was the only nation to buck this trend, treading water with near
stagnant output growth and a slight drop in new business. The sluggish
performance of France was mainly centred on the service sector, highlighting the
ongoing weakness of the French domestic market.
Eurozone employment ticked higher for the second time in the past three
months in April. Although the rate of expansion was only modest, it was
nonetheless the sharpest registered in over two-and-a-half years. Ireland, Spain
and Germany recorded increases in payroll numbers, with rates of jobs growth
hitting a near-eight year high in Ireland and a two-month peak in Germany. The
increase in Spain was the second so far this year, following a sustained period
of reduction running through much of 2008-2013. In contrast, levels of
employment continued to fall in France and Italy.
Input costs increased only slightly in April, rising at the slowest pace
since last June. Manufacturers saw purchase prices fall at the sharpest pace for
nine months, while service sector costs rose at the weakest rate in ten months.
Italy registered a slight drop in input prices for the first time since June
2013, while Spain was the only nation to signal a faster pace of cost inflation.
Price competition among companies seeking to attract new business led to the
sharpest drop in selling prices since August 2013. Output prices have now fallen
for 25 successive months.
The Eurozone Services Business Activity
Index posted 53.1 in April, unchanged from the earlier flash estimate
and above March’s 52.2. The headline index has signalled an expansion of
services output for nine successive months.
Concurrent growth of business activity was registered in all five of the
nations covered by the survey for the first time since May 2011. Rates of
expansion hit an 86-month high in Ireland, an 85-month record in Spain and a
two-month peak in Germany. Italy returned to growth, whereas the upturn in
France eased to near-stagnation.
Underpinning the latest expansion of business activity was the sharpest
growth of incoming new work since June 2011. New orders rose in Germany, Italy,
Spain and Ireland, but fell slightly in France. The outlook for the Eurozone
service sector also remained positive, with business confidence* staying on the
plus-side (despite dipping to a four-month low) and levels of outstanding
business stabilising following a near three-year sequence of sustained declines.
This encouraged job creation at service providers, with a slight increase in
employment registered for the third time in the past five months. Payroll
numbers were expanded in Germany, Spain and Ireland, but reduced in France and
Input price inflation eased for the third month running in April, as average
costs rose at the slowest pace since last June. This mainly reflected a sharp
easing in the rate of increase in Italy to a 55-month low. In contrast, input
price inflation accelerated in Germany, France, Spain and Ireland.
April saw output charges fall for the twenty-ninth month running, as
companies cut prices to stimulate client demand. Only Germany and Ireland
reported (negligible) increases in output charges. Rates of decline eased in
Italy and Spain, but accelerated in France.
* for business confidence, companies are asked whether they expect levels of
business activity in one year’s time to be higher, the same or lower than the
Chris Williamson, chief economist at Markit said:
"The final PMI confirms the earlier
flash estimate, indicating that the Eurozone started the second quarter with the
fastest growth seen for three years. At this rate we can expect GDP to rise by
at least 0.5% in the second quarter
"The upturn is led by Germany while France continues to lag, with the French
PMI merely indicating near-stagnant growth. That much we already knew from the
flash release. What’s new with the final release is the added detail on the
periphery, of which the most exciting news is the strong upturns that are
becoming apparent in Spain and Ireland, where the rates of growth rose to the
fastest for seven and eight years respectively. Italy’s recovery is meanwhile
also gaining momentum, with the pace of growth rising to one of the fastest seen
over the past three years."
"The upturn in the rate of expansion further reduces the likelihood of the
ECB considering it necessary to cut interest rates or embark on any other
non-conventional stimulus measures, for which the bar is already high. While
prices charged continued to fall in April, the accelerating speed of the
recovery suggests price pressures should pick up in coming months to allay
deflationary fears. ”