Eurozone business activity resumes growth in March

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The business activity of the Eurozone returned to growth in March, driven by a strong expansion of the manufacturing sector, Reuters reported. The robust growth seems unaffected by the third wave of pandemic which locked down most European countries. IHS Markit’s Services Purchasing Managers’ Index (PMI) rose to 49.6 in March from February’s 45.7, much higher than a flash estimate of 48.8 and only shy of the 50 mark that separates growth from contraction.

A composite PMI, combining both manufacturing and services and seen as a good gauge of economic health, rose to 53.2 from 48.8, above the 52.5 preliminary estimate.

“The economy has weathered recent lockdowns far better than many had expected, thanks to resurgent manufacturing growth and signs that social distancing and mobility restrictions are having far less of an impact on service sector businesses than seen this time last year,” Chris Williamson, chief business economist at IHS Markit told Reuters.

Factory activity growth galloped at its fastest pace in the near 24-year history of its PMI in March, a sister survey showed last week, although supply chain disruptions and renewed lockdowns in the region could rein it in soon. Supply issues led to a big jump in input costs for services firms and they increased their prices for the first time in just over a year. The output prices index rose to 50.5 from 48.1.

Still, a pick-up in Eurozone inflation is unlikely to be sustained and a slow recovery from a pandemic-induced recession will keep price growth under the European Central Bank’s target. Despite a slow vaccine roll-out and a surge in reported coronavirus infections, optimism about the year ahead improved. The composite future output index rose to 67.9 from 67.0, its highest since February 2018.

“This resilience suggests not only that companies and their customers are looking ahead to better times, but have also increasingly adapted to life with the virus,” Williamson said.

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