Eurozone private sector recovery slows in March

April 7, 2011 - 0:0

The Eurozone private sector activity continued to expand in March, but the growth rate slowed from a four-and-a-half year high, a closely watched survey revealed Tuesday. Disparities among core and periphery widened in March with austerity measures dampening domestic demand in peripheral economies.

The Final Eurozone composite output index fell to 57.6 in March from 58.2 in February, but stayed above the earlier flash estimate of 57.5, survey data from Markit Economics showed. The index stayed above the neutral 50 level for 20 consecutive months, reflecting continuing expansion in the private sector.
The services business activity index came in at 57.2 in March, up from 56.8 in February. The reading reached its highest level since August 2007. At the same time, the Purchasing Managers’ Index for manufacturing came in at 57.5, down from February’s ten-and-a-half year peak of 59.
National growth disparities widened in March. France and Germany each recorded strong increases in both manufacturing output and service sector activity.
Reflecting a weaker contribution from manufacturing output growth, Germany’s composite index, which measures the combined output of the manufacturing and service sectors, fell to 60.4 in March from 60.9 in February.
The growth of activity across the whole of the French private sector reached a seven-month high in March. The composite output index came in at 59.1, up from 59 in February.
Outstanding business in the euro area increased for the sixteenth successive month in March. However, it was marginally below February’s level. Employment improved for the eleventh month, with the rate of growth slightly slower than February’s three-year peak.
On the price front, average input costs rose to the greatest extent since July 2008. At the same time, manufacturers’ selling prices increased at a record pace, while service charges rose only moderately.
Increasing inflationary pressures means there can be little doubt that the European Central Bank will deliver a 25 basis point interest rate hike to 1.25 percent on Thursday, said Howard Archer, an economist at IHS Global Insight. But this rate hike could add the problems of Greece, Ireland, Portugal and, even Spain.
Elsewhere, data from Eurostat showed a decline in Eurozone retail sales in February. Retail sales fell by 0.1 percent in February from the previous month, while the consensus forecast called for an increase of 0.1 percent after rising 0.2 percent in January.
With the latest fall in retail sales, the modest household spending recovery seems unlikely to withstand fiscal and monetary squeeze, noted Ben May at Capital Economics. Even if household spending did increase in the first quarter, growth is likely to be weak at best in 2011. Further, economist expects sharp falls in spending in the periphery.
(Source: RTTNews)