Financial News: Eurozone Private Sector Growth Hits 10-Month Low

Eurozone Private Sector Growth Hits 10-Month Low

(RTTNews) - The euro area private sector growth eased to a ten-month low in March amid a reduction in new orders, and input cost inflation reached the strongest in over three years following the outbreak of war in the Middle East, data published by S&P Global showed Tuesday.

The flash composite output index posted 50.5 in March, down from 51.9 in February. The score fell below forecast of 51.0.

Although the index remained above the neutral 50.0 mark for the fifteenth straight month, it signalled the weakest expansion in ten months.

The slowdown in growth was in large part due to a near stagnation of business activity in the service sector. Meanwhile, manufacturing production increased moderately.

The services Purchasing Managers' Index fell to a 10-month low of 50.1 compared to 51.9 in the prior month. Economists were expecting a score of 51.1.

By contrast, the manufacturing PMI advanced to a 45-month high of 51.4 from 50.8 in February, while it was forecast to fall to 49.4.

"The flash Eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth," S&P Global Market Intelligence Chief Business Economist Chris Williamson said.

"The survey data are indicative of eurozone GDP growth slowing to a quarterly rate of just below 0.1% in March with the forward-looking indicators pointing to a heightened risk of a downturn the coming months," said Williamson.

The economist said the outlook depends on the duration of the war and any potential lasting impact on energy and supply chains.

The European Central Bank will have to tread a cautious path with respect to policy in the face of a clear and rising risk of stagflation in the coming months, added Williamson. The survey showed the softer expansion of Eurozone output was reported amid a renewed fall in new orders. The decline was centred on services as manufacturing new orders continued to grow. New export orders decreased moderately in March.

Input prices grew the most since February 2023 as steeper inflation was recorded across manufacturing and services. Companies raised their selling prices in March but at a much less pronounced pace than that seen for costs.

The war in the Middle East caused lengthening lead times for inputs in the Eurozone manufacturing sector and suppliers' delivery times lengthened substantially in March.

Employment decreased again in December with the fall centered on the manufacturing sector. Meanwhile, services employment increased marginally.

Business sentiment decreased sharply and hit the lowest in almost a year. Companies continue to forecast a rise in output over the coming year but the degree of optimism was below the series average.

Germany's private sector expanded at the slowest pace in three months in March. The flash composite output index posted 51.9 in March, down from 53.2 in February. The score was forecast to fall to 51.8.

The services PMI registered a 7-month low of 51.2 in March compared to 53.5 in the prior month. The reading was expected to drop to 52.5.

The manufacturing PMI hit a 45-month high of 51.7, up from 50.9 in February. The reading was seen at 49.6.

France's private sector activity contracted in March as demand weakened due to the war in the Middle East and uncertainty ahead of local elections.

The flash composite output index fell to a five-month low of 48.3 in March from 49.9 in February. The score was expected to drop moderately to 49.2.

At the same time, services PMI declined more-than-expected to 48.3 from 49.6 a month ago. The reading was below consensus forecast of 49.2.

However, the factory PMI rose slightly to 50.2 from 50.1 in the prior month. The expected reading was 49.0.

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