LONDON (Reuters) – Euro zone business activity was within a whisker of returning to growth in March, outperforming expectations, according to a survey which showed inflationary pressures bucked a recent trend and eased this month.
However, the recovery was uneven with a strong rebound in services activity offsetting a more severe downturn in manufacturing.
HCOB’s preliminary composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 49.9 this month from February’s 49.2, ahead of expectations in a Reuters poll for 49.7 but marking its tenth month below the 50 level separating growth from contraction.
Indexes covering the overall cost of operating and prices charged eased this month, with the latter falling to a four-month low of 53.1 from 54.4.
That will likely be welcomed by policymakers at the European Central Bank who kept borrowing costs at record highs earlier this month while cautiously laying the ground to lower them later this year. They will start cutting in June, a Reuters poll found.
A PMI covering the bloc’s dominant services industry soared to a nine-month high of 51.1 from February’s 50.2, well ahead of the Reuters poll estimate for 50.5.
“The fact that the services PMI moved further into expansionary territory at 51.1 should be seen as a positive development, especially as it marks the second consecutive month of growth,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Demand for services increased for the first time since June, with the new business index rising to 50.5 from 49.8.
But the manufacturing PMI fell to a three-month low of 45.7 from 46.5, far below all expectations in the Reuters poll which had predicted an increase to 47.0.
“If you were hoping for a recovery in the manufacturing sector in the first quarter, it’s time to throw in the towel,” de la Rubia said.
An index monitoring output nudged up to 46.8 from 46.6.
Suggesting factory managers don’t expect an imminent improvement, headcount was reduced at the sharpest rate since November. The employment index fell to 46.6 from 47.1.
(Reporting by Jonathan Cable; Editing by Toby Chopra)
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