Eurozone private sector growth pulled back from March’s 11-month high in April as concerns over Greece crisis started to weigh on economic activity despite the boost from the European Central Bank’s quantitative easing.
The flash composite output index fell unexpectedly to 53.5 in April from 54 in March, according to the purchasing managers’ survey results published by Markit Economics. The expected score was 54.4.
Although the index signaled an easing in the pace of expansion, the latest reading was the second-highest seen over the last nine months. Both services and manufacturing continued to expand, but at slower rates.
The Purchasing Managers’ Index, or PMI, for the services sector declined to 53.7 in April from 54.2 in March, while it was forecast to rise to 54.5.
Likewise, the manufacturing PMI dropped to 51.9 from 52.2 a month ago. Economists had expected the score to improve to 52.6.
“The weaker rate of expansion is a big disappointment, given widespread expectations that the ECB’s quantitative easing will have boosted the fledgling recovery seen at the start of the year,” Chris Williamson, chief economist at Markit, said.
However, it is too early to draw firm conclusions about whether growth is faltering again and the effectiveness of policy, he noted.
Jessica Hinds, a European economist at Capital Economics, said there is a clear risk that the composite PMI falls further during the second quarter as concerns about the situation in Greece and a possible euro exit intensify, raising the threat of a renewed economic slowdown in the Eurozone.
The Survey of Professional Forecasters projected Eurozone to grow 1.4 percent this year and 1.7 percent in 2016.
Incoming new business at service providers continued to increase, but growth of manufacturing new orders slowed.
April saw the strongest monthly gain in employment since August 2011. Job creation in manufacturing inched up to the highest since August 2011 and revived in services to a rate not exceeded since May 2011.
Despite the increase in workforce numbers, backlogs of work edged higher for a third consecutive month.
Average selling prices for goods and services meanwhile continued to fall, but the rate of decline was the weakest since June of last year. Average input costs rose at a rate just shy of March’s eight-month high.
The overall slowdown in Eurozone reflected weaker rates of expansion in France and Germany, which offset an acceleration of growth in the rest of the region to the fastest since August 2007.
Germany’s private sector growth moderated in April from an eight-month high. The flash composite output index fell to 54.2 in April from 55.4 in March. The latest index reading was still the second-strongest since last September.
The services PMI dropped to 54.4 in April from 55.4 in March. It was below the expected score of 55.5. The manufacturing PMI fell unexpectedly to 51.9 from 52.8 in March. Economists had forecast the indicator to rise to 53.
The weaker increase in activity reflected slower growth at both manufacturers and service providers. Some companies attributed this to a weaker rise in new orders and increased prices.
The French private sector growth weakened to near stagnation in April. The flash composite output index fell to 50.2 in April, a 3-month low, from 51.5 in March, signaling a fractional increase in output.
The survey reflected a weaker growth in the service sector combined with a sharper fall in manufacturing output.
The services PMI fell to 50.8 from 52.4 in March. It was forecast to remain unchanged at 52.4. The manufacturing PMI declined to 48.4 from 48.8, while it was forecast to rise to 49.2.
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