FX.co ★ Eurozone Private Sector Growth Strongest In Almost A Year

The private sector of the Eurozone experienced a significant expansion in April, its most substantial in nearly a year. This increase was possible as a result of the strength of the service sector, which compensated for the ongoing decline in manufacturing activity. These findings were revealed in the S&P Global's flash survey results announced on Tuesday.

In April, the composite output index scored 51.4, which was an improvement from the 50.3 recorded in March. This surpasses economists' prediction of 50.8, indicating a two-month consecutive expansion for the private sector following nine months of steady downturn up to February. The recent score also represents the most robust growth registered since May of the previous year.

The service sector, on its part, recorded expansion for the third consecutive month, with the rate of expansion being the highest in eleven months. Conversely, the manufacturing output shrunk for the thirteenth straight month.

While new orders for services surged at the fastest pace since May of the past year, orders for manufactured goods experienced an accelerated decrease. The job market also experienced growth for the fourth straight month following two months of marginal declines at the end of 2023. The rate of net job creation increased to its highest since June last year.

The survey further revealed that manufacturers' delivery times declined for three consecutive months and improved to the most significant extent since August of the previous year. Both input costs and average selling prices rose at a faster pace in April.

Even though business expectations for the forthcoming twelve months cooled off slightly, it still ranks as the second highest recorded in the past 14 months.

Projections for the upcoming second quarter suggest a GDP expansion of 0.3%, a figure that aligns with the growth rate of the first quarter, according to Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank.

The rise in input costs due to higher oil prices and increased wages are likely to test the European Central Bank's (ECB) resolve to cut interest rates in June. However, the ECB is still expected to cut rates in that month as suggested by economist de la Rubia, "Nevertheless, instead of a 'pragmatic speed' approach as suggested by Francois Villeroy de Galhau from the ECB, a more cautious method is expected," de la Rubia remarked.

Furthermore, the survey highlights the AB's private sector recorded its first expansion in ten months due to a significant rise in services activity, marking the return of Germany to growth in April and signifying France's move closer to stabilization.

France's flash HCOB composite output index rose to an 11-month high of 49.9 from 48.3 in the preceding month due to services activity's renewed expansion. However, the broader expansion rate was impacted by an accelerated decline in manufacturing output.

In contrast, the manufacturing PMI fell to a three-month low of 44.9 from 46.2 in the previous month while the anticipated score was 46.9.