Euro Area: Improvement in composite PMI suggests Eurozone recovery remains on track
April 23, 2014
The flash estimate of the Markit Eurozone PMI Composite Output Index came in at 54.0 in April. The result was up from the 53.2 recorded in March and contrasted market expectations of a drop to 53.0. At the current level, the composite PMI-the result of a survey of over 5,000 manufacturing and services businesses-is currently at its highest point since May 2011. Moreover, the PMI has been above the 50-threshold that signals a stable economic outlook since July of last year, which suggests continued expansion in economic activity.
The result suggests that the recovery in the Euro area remains on track. New orders continue to record strong growth, although this has not yet translated into significant job creation rates. On a negative note, businesses are continuing to reduce prices; output prices have dropped for a twenty-fifth consecutive month. According to Markit, “[w]ith selling prices falling at the fastest pace since last August despite the upturn in activity, there will be growing fears that deflationary pressures are intensifying.”
At a country level, Germany continues to lead the improvement. Its flash composite PMI rose from 54.3 in March to 56.3 in April. Conversely, France's composite PMI fell from 51.8 March to 50.5 in April. Meanwhile, in the rest of the region, the composite PMI recorded the fastest rate of expansion since February 2011. According to Markit, “[t]he PMI is signalling that GDP is on course to rise by 0.5% in the second quarter, building on a 0.4% rise in the first quarter.”
FocusEconomics panelists see the economy expanding 1.1% in 2014, which is up 0.1 percentage points from last month's forecast. For 2015, panelists expect the economy to accelerate to a 1.5% expansion.
Author: Armando Ciccarelli, Head of Data Solutions