Euro Area: Expansion in business activity accelerates in April amid a booming manufacturing sector
The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, rose marginally to 53.7 in April from 53.2 in March. The print again surprised markets on the upside and marked the strongest reading in nine months. Therefore, the index moved further above the 50-threshold that distinguishes expanding from contracting activity in the private sector.
In April, the manufacturing sector moved further into expansionary territory, logging a fresh record in the survey’s history, supported by soaring new orders—especially from abroad—and a record high jump in production. Meanwhile, the services sector swung from contraction to expansion for the first time since last August as production increased and new orders stabilized, despite some tightening in social distancing restrictions and thanks to spill-over benefits from a strong manufacturing performance.
Meanwhile, firms added jobs for the third month running with an eye to the recovery. On the price front, input cost inflation intensified further, hitting a decade high for both services and manufacturing companies amid serious supply shortages and robust demand. In turn, output prices rose at the fastest pace since January 2018. Lastly, business optimism strengthened on recovery hopes.
Assessing the Eurozone’s two largest economies, growth in business activity was solid albeit somewhat softer than in the previous month in Germany, while business activity in France gathered further pace.
Commenting on the release, Chris Williamson, chief business economist at IHS Markit, said:
“In a month during which virus containment measures were tightened in the face of further waves of infections, the eurozone economy showed encouraging strength. […] The steep rise in demand for raw materials is continuing to lead to unprecedented supply chain delays, which are in turn driving up firms’ costs at the fastest rate for a decade. Consumer price inflation may well rise sharply in coming months as a result, though the extent of the rise will be dependent on the strength of demand and the supply situation, both of which remain highly uncertain at the moment.”
Meanwhile, Bert Colijn, Eurozone senior economist at ING, stated:
“The eurozone economy looks like it’s on the brink of a startling recovery. Only months ago it seemed to be rapidly turning into the weak link among advanced markets, being slow out the gates with vaccinations, seeing lockdowns extended and having weaker fiscal support. True, first-quarter GDP growth figures are set to still show declines, but the April PMI adds to a lot of encouraging underlying numbers.”