Eurozone economic growth accelerates to 7-month high

Business activity in the eurozone expanded at its fastest pace in seven months in March, supported by an easing of the manufacturing slowdown, despite a slowdown in the services sector, according to a recent survey.

The improving economic climate in the single currency area could gain further momentum in the coming months, with infrastructure and defense spending plans, particularly in Germany, boosting hopes for an economic recovery in Europe. Quoted from CNBC, the preliminary HCOB Composite Purchasing Managers’ Index (PMI) for the eurozone, compiled by S&P Global, rose to 50.4 this month, up from 50.2 in February, its highest level since August. The index has remained above the 50 threshold that separates growth from contraction since the beginning of the year.

However, the growth in economic activity was modest, falling short of expectations in the Reuters poll, which had expected a rise to 50.8. The services sector index, the region’s dominant sector, fell to 50.4 from 50.6 last month, also below expectations of 51.0.

However, the contraction in the manufacturing sector, which has been ongoing for nearly three years, saw a marked decline, with the headline Purchasing Managers’ Index (PMI) rising to 48.7 in March, its highest level in more than two years, compared to 47.6 in February.

The reading was higher than the Reuters poll forecast of 48.2.

The factory production sub-index, which contributes to the composite PMI, also showed growth for the first time in two years, jumping to 50.7 from 48.9, its highest level since May 2022.

“With the arrival of spring, we may see the beginning of a recovery in the manufacturing sector,” said Cyrus de la Rubia, chief economist at Commerzbank Hamburg. While one shouldn’t jump to conclusions based on a single reading, it’s notable that manufacturers expanded their production for the first time since March 2023.

On Wall Street, US stocks closed higher on Friday, finishing well off their lows, with the Dow Jones and S&P 500 inching up slightly, while the Nasdaq added 0.5%.