Eurozone economic recovery accelerates in April as services rebound -PMI

LONDON (Reuters) – The eurozone’s recovery from the pandemic-induced economic slowdown was much stronger than expected in April as the services sector adjusted to lockdowns and made a surprise return to growth, according to a survey.
As the continent faces a new wave of coronavirus infections, governments have reimposed strict restrictions to contain the spread, forcing some businesses to shut down and encouraging citizens to stay at home.
That meant the economy was expected to recover at a much slower pace this quarter than expected a month earlier, according to a Reuters poll last week. [ECILT/EU]
But the IHS Markit Composite Purchasing Managers’ Flash Index, considered a good guide to economic health, hit a nine-month high of 53.7 from 53.2 in March, confusing expectations of a Reuters poll for a drop to 52.8. Anything over 50 indicates growth.
âThe eurozone economy appears to be on the verge of a surprising recovery. Just a few months ago it seemed to be quickly becoming the weak link in advanced markets, slowing doors with vaccinations, seeing lockdowns extended and enjoying weaker budget support, âsaid Bert Colijn at ING.
“True, first quarter GDP growth figures are expected to show further declines, but the April PMI adds to many encouraging underlying figures.”
On Thursday, the European Central Bank maintained its abundant stimulus to support the economy as President Christine Lagarde said there were clear signs of improvement.
“Progress in vaccination campaigns and a planned gradual easing of containment measures underpin expectations of a firm rebound in economic activity during 2021,” she told a press conference .
A PMI for the dominant services sector fell to 50.3 from 49.6 last month, beating the Reuters poll’s median forecast for a decline to 49.1.
Meanwhile, monetary union factories experienced their busiest month since the survey began in mid-1997.
An index measuring production has grown to a high level.
The German PMI gave a bullish outlook for Europe’s largest economy, with factories continuing to produce goods at near record rates, although activity in the service sector remained sluggish due to coronavirus brakes.
French commercial activity grew more strongly than expected, according to its survey, the second largest economy in the euro zone having shown signs of resilience.
In Britain, outside the eurozone and the European Union, a deluge of new orders has swept through businesses as the country lifted some of its COVID-19 restrictions, indicating a rapid rebound.
RISING COSTS
The supply side disruptions have left factories facing soaring raw material costs. The Eurozone input price index reached near record highs and manufacturers were only able to pass on part of this increase to customers.
âThe PMI for composite input prices is at its highest level in a decade, with supply shortages driving up input costs in the manufacturing sector. We hope these prove to be temporary, âsaid Jessica Hinds of Capital Economics.
Nonetheless, any sign of price pressure can be welcomed by the ECB, which has struggled to bring inflation closer to its target.
While some businesses remain open – or prepare to reopen – service companies have increased their workforce at the fastest rate since before Europe faced the full brunt of the pandemic.
The hope that the slow vaccination programs in the bloc will accelerate and allow a return to some form of normalcy has sparked optimism for the coming year.
The composite index of future production climbed to 68.8 from 67.9, the highest since IHS Markit began collecting data in July 2012.
Eurozone consumer confidence rose 2.7 points in April compared to March, European Commission figures showed on Thursday.
Reporting by Jonathan Cable; Editing by Toby Chopra