Eurozone business activity grew at its fastest pace in seven months in March, bolstered by a moderation in the prolonged manufacturing downturn, despite slower growth in services, according to a survey.
The improving business environment in the eurozone could gain momentum in the coming months, especially as plans in Germany inspire optimism for a turnaround in Europe’s economic prospects.
HCOB's preliminary composite Purchasing Managers' Index for the eurozone, compiled by S&P Global, rose to 50.4 this month from February's 50.2, marking the highest level since August. The index has remained above the 50 threshold that separates growth from contraction since the beginning of the year.
However, the growth in activity remains modest, and the index fell short of the Reuters poll prediction that anticipated an increase to 50.8.
The index measuring the services sector, which is the dominant industry in the bloc, declined to 50.4 from last month's 50.6, below the predicted 51.0.
Conversely, the near three-year contraction in manufacturing showed signs of easing, with the manufacturing PMI increasing to 48.7 from 47.6 in February, surpassing the forecast of 48.2.
An index that measures factory output, contributing to the composite PMI, indicated growth for the first time in two years, rising to 50.7 from 48.9, its highest since May 2022.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, remarked that the onset of spring may unveil the first signs of recovery in manufacturing. He emphasized that while one data point should not overly influence perspectives, it is significant that manufacturers expanded output for the first time since March 2023.
In response to rising costs, manufacturing firms increased their prices. Both input and output inflation reached their highest levels in seven months, although the services sector experienced a slower pace of price growth.
Reflecting an improved business sentiment, employment growth accelerated this month, with the composite employment index rising to 50.1 from 49.2, crossing the breakeven point for the first time in eight months.