Eurozone business activity growth pulled back from March’s 11-month high, according to flash PMI (purchasing managers' index) survey data for April. The slowdown reflected weaker rates of expansion in France and Germany, which offset an acceleration of growth in the rest of the region to the fastest since August 2007.
The Markit Eurozone PMI fell from 54.0 in March to 53.5 in April, according to the flash estimate based on an expected 85% of usual monthly replies. Although signalling an easing in the pace of expansion, the latest reading was still the second-highest seen over the past nine months. The manufacturing and service sectors continued to expand, but both saw rates of expansion cool compared to their ten- and eight-month respective highs seen in March.
Incoming new business at service providers continued to rise solidly, but growth of manufacturing new orders slowed. Overall growth of new orders moderated slightly from March’s near four-year high as a result, but remained sufficiently strong to encourage firms to take on staff at a marginally increased rate. April saw the strongest monthly gain in employment since August 2011. Job creation in manufacturing inched up to the highest since August 2011 and revived in services to a rate not exceeded since May 2011.
Despite the increase in workforce numbers, Markit said backlogs of work edged higher for a third consecutive month, raising the likelihood of further job gains in May.
Average selling prices for goods and services meanwhile continued to fall, but the rate of decline was the weakest since June of last year, in part reflecting the pass-through of higher input costs. Average input costs rose at a rate just shy of March’s eight-month high.
Manufacturers’ selling prices rose marginally for the first time since last August, as their input prices rose at the fastest rate since last July.
Rates charged for services meanwhile fell at the slowest rate since June 2014, despite input cost inflation easing slightly during the month.
Growth slowed in Germany, reflecting weaker expansions in both manufacturing and services, but remained slightly above the pace of expansion seen across the region as a whole. France saw a steeper slowdown, with growth almost stalling. A near-stagnation of service sector growth in France was accompanied by a faster rate of decline of factory output.
In contrast to the slower rates of expansion seen in Germany and France, the rest of the region enjoyed the strongest growth since August 2007, with growth of new orders and employment also picking up to the highest since mid-2007.
Chris Williamson, chief economist at Markit said: “The weaker rate of expansion is a big disappointment, given widespread expectations that the ECB’s quantitative easing will have boosted the fledgling recovery seen at the start of the year.
"However, it’s too early to draw firm conclusions about whether growth is faltering again and the effectiveness of policy. Although the PMI has pulled back from March’s recent high, the index remains above the average seen in the first quarter and is indicative of the eurozone economy growing at a reasonably robust quarterly rate of 0.4% at the start of the second quarter.
"The survey also showed growth outside of France and Germany accelerating to the highest since August 2007, raising hopes that stimulus is feeding through to the ‘periphery.’
"The slowdown in April was in fact therefore a symptom of weaker expansions in both Germany and France, with the latter suffering a near-stalling of growth led by an accelerating downturn of its manufacturing economy.
“There are signs of increased risk aversion creeping in among businesses and their customers, linked in some cases to worries about Greece, which is likely to have dampened demand. However, in the case of France, the poor performance appears to reflect a longer-term malaise which, after a promising start to the year, in fact shows few signs of lifting.”