Euro zone economic growth picks up in April, PMI shows
(Reuters) - Euro zone economic growth picked up strongly in April, driven by gains in manufacturing and the services sector, marking the fastest pace of expansion since September last year, a new survey showed.
The results suggest the region's economy is stabilizing and could see a more sustained recovery in the coming months, especially as member states such as Germany and France prepare to launch large spending programmes on infrastructure and defence.
The preliminary composite HCOB purchasing managers' index (PMI), compiled by S&P Global, rose to 51.0 in April from 50.4 in March, an eight-month high. The PMI has remained above the 50 mark that separates growth from contraction since the start of the year.
However, while economic growth improved, it was still slightly below the 51.3 forecast by economists polled by Reuters.
April's PMI is a positive sign as the eurozone economy starts to gain momentum. The notable improvement in manufacturing, especially in Germany, could lead to stronger GDP growth in the second quarter, said ING chief economist Bert Colijn.
With infrastructure and defence investment plans underway, we expect the economy to recover on a more solid footing. However, challenges remain, especially in the face of negative factors from global trade and weak export demand.
Economic activity in Germany, the region's largest economy, expanded at its fastest pace in 12 months, driven by strong growth in manufacturing. However, Germany's services sector has shown signs of slowing after months of steady growth.
In France, the region's second-largest economy, business activity contracted for an eighth straight month as business confidence fell to its lowest since May 2020.
Meanwhile, in the UK, the composite PMI rose to a seven-month high as the services sector expanded enough to offset a decline in manufacturing. This may provide some comfort to the government as it faces economic challenges ahead.
MANUFACTURING GROWTH IMPROVES
The eurozone services PMI rose slightly to 51.2 from 50.8 last month, in line with market expectations. However, the manufacturing sector, which has been in contraction for almost three years, showed a big improvement. The manufacturing PMI rose to 49.5 in April, up from 48.7 in March, its highest level in more than two years.
The gauge of factory output, part of the composite PMI, expanded for the first time since 2022. It rose to 51.0 from 49.3, its highest level in more than two years.
Manufacturing firms are facing higher input costs and have raised prices to compensate. However, the pace of price increases in the services sector has been slower than in manufacturing, the survey showed.
In another positive sign, job creation accelerated in April. The composite employment index rose to 51.0 from 50.1, its highest level in nine months, reflecting an improvement in businesses' business outlook.