Eurozone: Business activity loses momentum slightly in April

Recent data suggest that business activity in the Euro area started the second quarter on soft footing. The preliminary Eurozone Composite Purchasing Managers’ Index (PMI), elaborated by Markit, inched down from a revised 53.1 in March (previously reported: 53.7) to 53.0 in April. The result undershot market analysts’ expectations of a 53.3 reading.

The fall in April reflected a downturn in services growth, despite an uptick in the manufacturing sector. Markit noted that growth started the second quarter on weaker footing than was seen in the first quarter. Lackluster rises were recorded in employment and new orders, while expectations about future business activity in the services sector was broadly unchanged. Meanwhile, input prices increased for the first time in four months, although modestly.

Regarding the two largest Eurozone economies, the Composite PMI in Germany fell to a nine-month low amid weak activity in services. However, France’s Composite PMI improved and returned to expansionary territory in April. Elsewhere in the region, the rate of growth in business activity fell to an over-one-year low.

The European Central Bank (ECB) expects the Eurozone economy to expand 1.7% in 2016 and to pick up further to 1.9% growth in 2017. FocusEconomics Consensus Forecast panelists expect the Eurozone economy to expand 1.5% in 2016, which is unchanged from last month’s forecast. For 2017, panelists expect the economy to expand 1.6%.