Eurozone April private sector growth rises unexpectedly

April 20, 2011 - 0:0

Eurozone private sector activity growth accelerated unexpectedly in April, suggesting no major impact on the euro area from the disaster in Japan, survey results from Markit Economics showed Tuesday.

Meanwhile, euro area consumer morale weakened more than expected in April. According to a flash estimate from the European Commission, the consumer confidence index fell to minus 11.4 from minus 10.6 in March. The consensus forecast called for a reading of minus 11.
Reflecting economic momentum, the flash composite output index rose to 57.8 in April from 57.6 in March. April reading stayed slightly above the first quarter average of 57.6 and signaled the second-strongest monthly rise in output since June 2007. The score was in contrast to economists’ expectations for a decline to 57 and just below February’s post-recession high.
A reading above 50 suggests expansion in the sector. The manufacturing sector continued to lead the expansion, with the flash Purchasing Managers’ Index (PMI) rising to 57.7 from March’s 57.5 and above the consensus forecast of 57.
Activity in the manufacturing sector climbed to the second-highest level since June 2006. The flash manufacturing output index rose to 60 in April from 58.5 in March.
On the other hand, the business activity index for services fell to 56.9 from 57.2 in March, matching economists’ expectations. Although the expansion slowed in services, it was the second strongest since August 2007.
Jonathan Loynes at Capital Economics expects the Eurozone’s economic recovery to slow later this year, as the strong euro and widening fiscal squeeze take hold. For now, there still seems to be plenty of momentum. But the economist said that it would not solve the peripheral debt crisis.
Again, Germany and France were the two nations behind the overall eurozone growth in April. With the weak domestic demand held back the periphery, the divergence between core nations and peripheral economies continue to exist.
Germany’s composite output index fell to 59.9, a 5-month low, from 60.4 in March. The slower rate of private sector growth reflected a weaker contribution in April from the services economy.
At the same time, French private sector activity rose to its highest level in over ten-and-a-half years in April, led by strong service sector. The composite PMI rose to 62.4 from 59.1 in March.
The April survey is consistent with GDP rising at a quarterly rate of 0.8 percent in the euro area, the same buoyant pace as signaled for the first quarter, Chris Williamson, chief economist at Markit said.
As in March, euro area new business expanded at the same strong pace, but slightly down from February’s post recession high. The growth in new business in the service sector offset a five-month low growth in manufacturing new orders.
With firms adding more staff to meet increasing demand for goods and services, backlogs of work accumulated at the slowest pace for four months. Job creation hit a three-and-a-half year high in April.
Average prices charged for goods and services increased for the ninth month, with the inflation rate rising slightly to just below the all-time high seen in July 2008. The rate of increase in input cost slowed only slightly from March’s 32-month high. Rates slowed in manufacturing and services, although the former continued to register a near-record rate of growth.
The further increase in the output prices will stoke inflation concerns, reinforcing expectations of further rate increases from the European Central Bank, said ING Bank NV’s Martin van Vliet.
(Source: RTTNews)