Eurozone business growth stronger than expected in March – 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) – Business activity in the eurozone was stronger than expected this month, according to a survey released on Thursday, although prices also rose at a record pace, which is likely to have increased pressure on the European Central Bank to raise interest rates.

Some of that growth came from a rebound following the lifting of COVID restrictions, and the outlook is bleak as supply chain issues caused by the coronavirus pandemic worsened after Ukraine invaded Ukraine. Russia.

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

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Anything above 50 indicates growth.

“The survey data underscores the immediate and significant impact of the Russian-Ukrainian war on the eurozone economy, and underscores the risk of the eurozone falling into decline in the second quarter,” Chris said. Williamson, chief economist at S&P. Global.

“The war has aggravated price pressures and pandemic-related supply chain constraints.”

The composite price indices for inputs and outputs were at their highest level in the history of the survey.

The producer price index rose from 62.3 to 65.7, suggesting that inflation, already at a record high of 5.8% in February, has increased further. The ECB would like it at 2%.

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

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

Demand has been resilient, and with more pandemic-related restrictions, businesses have been increasing their workforces at a faster pace. The employment index in services rose from 53.6 to 54.8.

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

An index measuring the output, which feeds the composite PMI, fell to 53.6 from 55.5.

High inflation and concerns over Russia’s invasion of Ukraine have seriously shaken optimism. The future factory production index fell to 53.8 from 68.5, its lowest level since May 2020 – shortly after the start of the coronavirus pandemic.

“Businesses are bracing themselves for weaker economic growth, with future output expectations slumping in March as businesses grow increasingly concerned about the impact of war on an economy still struggling to recover. recover from the pandemic,” Williamson said.

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Reporting by Jonathan Cable; Editing by Hugh Lawson

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