Eurozone business hit by weaker demand in April
london — Businesses across the eurozone stumbled into the second quarter as demand remained weak despite more modest price rises, surveys showed on Thursday.
Growth stuttered in Germany and forward-looking indicators in its Purchasing Managers’ Index suggest a contraction among manufacturers in Europe’s largest economy will continue for a few more months at least.
“The big disappointment is that the German Manufacturing PMI was barely any higher than it was last month and, at 44.5, it points to a continuing industrial recession,” said Andrew Kenningham at Capital Economics.
The euro fell against the dollar after the worse-than-expected German data. Activity in France, the bloc’s second-biggest economy, only stabilised this month after contracting in March. An unexpected rebound in services offset continued weakness in manufacturing. Germany and France are the only two eurozone economies to report flash readings.
“A weighted average of the Composite PMIs for the rest of the eurozone must have dropped back again in April, so there may be more disappointing news to come from Italy and/or Spain when the final surveys are published at the end of the month,” Kenningham said.
Considered a good guide to economic health, IHS Markit’s flash composite eurozone PMI fell to 51.3 this month from a final March reading of 51.6, confounding the median expectation in a Reuters poll for a rise to 51.8. “The euro area outlook is challenging to say the least, and the ECB remains tilted towards further easing measures,” said Jan von Gerich at Nordea e-Markets.
A week ago, European Central Bank President Mario Draghi raised the prospect of more support for the struggling eurozone economy if its slowdown persists. IHS Markit said the PMIs, if maintained, indicated second-quarter GDP growth of just under 0.2 per cent, below the 0.3 per cent predicted in a Reuters poll earlier this month.
New business barely increased in April — the sub-index nudged up to 50.6 from 50.5, close to the 50 mark dividing growth from contraction — and there is scant sign of an imminent turnaround.