Strong trade growth in euro zone in March, but outlook darkens: PMI

Shoppers walk past a beggar, amid the coronavirus disease (COVID-19) pandemic in Berlin, Germany December 14, 2020. REUTERS/Hannibal Hanschke

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LONDON, March 24 (Reuters) – Euro zone trade growth was stronger than expected this month, a survey showed on Thursday, although prices rose at a record pace, likely to increase pressure on the European Central Bank. to raise interest rates.

However, some of that expansion came from a rebound after the lifting of COVID restrictions and the picture is murky as supply chain problems caused by the coronavirus pandemic have worsened following the Russian invasion of Ukraine. .

S&P Global’s Flash Composite Purchasing Managers’ Index, seen as a good indicator of overall economic health, fell to 54.5 in March from 55.5 in February, although it was comfortably above the 53.9 median forecast in a Reuters poll.

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Any value above 50 indicates growth.

“The euro zone PMI survey for March is consistent with our view that the economy will grow more slowly than most anticipate this year, while inflation will beat expectations,” said Jack Allen-Reynolds of Capital Economics.

“The survey also showed supply problems getting worse, which companies linked to the war in Ukraine, as well as delays from China following the latest COVID outbreak there.”

Activity in Germany, Europe’s largest economy, fell this month as producer price inflation hit a new record and the war in Ukraine hit demand and supply chains, previous data showed.

But French business activity unexpectedly accelerated to an eight-month high as easier COVID restrictions boosted the services sector and overshadowed concerns about the impact of the Ukraine crisis on manufacturing.

In Britain, outside the common currency area, the private sector services PMI hit its highest level in nine months, but manufacturing output hit its lowest level in five months.

S&P Global said the reopening of the British economy after pandemic restrictions helped offset the drag from the conflict in Ukraine, Brexit and rising prices.


Composite input and output price indices for the euro zone hit their highest level in the survey’s history.

The Producer Price Index jumped to 65.7 from 62.3, suggesting that inflation, already hitting a record 5.8% in February, needs to rise further. The ECB would like it at 2%.

“Price pressure remains very high. Consequently, consumers will have to expect prices to rise further in the coming months. This increases the pressure on the ECB to initiate a change in monetary policy,” said Christoph Weil of Commerzbank.

Earlier this month, the ECB said it would stop pumping money into financial markets this summer, paving the way for a rise in interest rates. Read more

A PMI covering the bloc’s dominant services industry fell to 54.8 this month from 55.5, but beat the Reuters poll estimate of 54.2.

Demand was resilient and with more restrictions related to the pandemic, companies increased the number of employees at a faster rate. The service employment index rose to 54.8 from 53.6.

While factory activity remained robust, the pace of growth slowed to its weakest level since January last year. The manufacturing PMI fell to 57.0 from 58.2, but beat expectations of 56.0.

An index measurement output, which feeds the Composite PMI, sank to 53.6 from 55.5.

High inflation and concerns about Russia’s invasion of Ukraine dented optimism. The factory future output index slumped to 53.8 from 68.5, its lowest reading since May 2020, shortly after the coronavirus pandemic began.

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Information from Jonathan Cable; Edited by Hugh Lawson and Toby Chopra

Our standards: The Thomson Reuters Trust Principles.

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