Rebound In Services Activity Lifts Eurozone Private Sector Growth

Eurozone private sector grew the most in seven months in April as the relaxation of pandemic-related restrictions revived services demand offsetting the impact of the slowdown in the manufacturing sector, a closely watched survey showed on Friday.

The flash S&P Global composite output index unexpectedly rose to a seven-month high of 55.8 in April from 54.9 in the previous month. The score was forecast to fall to 53.9.

The services Purchasing Managers’ Index came in at an eight-month high of 57.7 versus 55.6 in March. The expected reading was 55.0.

The manufacturing PMI fell to a 15-month low of 55.3 from 56.5 a month ago. This was above the forecast of 54.7.

The weakness of the manufacturing sector is a major concern as it points to an economy that is not firing on all cylinders, Chris Williamson, chief business economist at S&P Global, said.

Similarly, the ever-rising cost of living suggests that the service sector growth could cool sharply once the initial rebound from the opening up of the economy fades, Williamson added.

Inflows of new business in the services picked up to the fastest since last August. In contrast, manufacturing output growth came close to stalling in April. The autos sector was particularly hard hit.

Many companies suffered production curbs due to ongoing supply constraints. Disruptions emanating from the Ukraine war and fresh lockdowns in China exacerbated existing supply issues.

Employment rose at the sharpest rate for five months, albeit with hiring constrained in many firms by labor shortages. Business expectations for the year ahead lifted from March’s 17-month low.

Prices charged for goods and services rose at an unprecedented rate in April amid another near-record rise in firms’ costs, hinting that inflation has further to rise.

Output trends differed considerably across the region. Growth slowed to a three-month low in Germany, while growth picked up in France to the sharpest since January 2018.

Germany’s private sector logged a slowdown in growth in April amid reports of severe supply disruptions and a fall in demand for goods weighing on manufacturing activity. Nonetheless, the service sector sustained its rebound with the waning influence of the pandemic.

The flash composite output index registered 54.5 in April. Although down from 55.1 in March, and the lowest for three months, the latest reading was still above the 50.0 threshold and forecast of 54.1.

The services PMI rose to an eight-month high of 57.9 in April from 56.1 a month ago. Economists had expected the score to fall to 55.5.

By contrast, the manufacturing PMI declined to a 20-month low of 54.1 from 56.9 in March. The expected reading was 54.5.

Meanwhile, the French economy enjoyed a strong start to the second quarter as private sector business activity grew at its sharpest pace in just over four years. The service sector was once again the main driving force.

At 57.5, the composite output index hit a 51-month high, from 56.3 in the previous month. The score was seen at 55.0.

The services PMI advanced unexpectedly to 58.8 from 57.4 in March. The expected score was 56.5. Likewise, the manufacturing PMI improved to 55.4 from 54.7 a month ago.

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