Eurozone Private Sector Activity Expands At Fastest Pace In 6 Years

Eurozone private sector grew at the fastest pace in six years in April as firms boosted operating capacity to meet buoyant demand amid widespread optimism about future prospects despite political uncertainties.

For the first time since 2012, growth in France surpassed Germany’s expansion as output and new order growth softened in the latter.

The euro area flash composite output index rose unexpectedly to 56.7 in April from 56.4 in March, survey results from IHS Markit showed Friday.

The latest reading was the highest since April 2011. Economists had forecast the score to remain unchanged at 56.4.

Growth accelerated in both manufacturing and services to the highest since April 2011, with manufacturing clearly benefiting from the weak euro.

The services Purchasing Managers’ Index climbed to 56.2 from 56.0 in March. The score was forecast to drop to 55.9.

Likewise, the factory PMI rose to 56.8 from 56.2 in March, defying expectations for a fall to 56.0.

The April flash PMI is running at a level consistent with 0.7 percent GDP growth, up from 0.6 percent in the first quarter, Chris Williamson, chief business economist at IHS Markit, said.

“Such strong growth, if sustained, will inevitably lead to upward revisions to economists’ 2017 forecasts,” Williamson added.

Growth rates of incoming new business and backlogs of uncompleted work remained close to March’s peak. Both registered the second-strongest monthly improvements in six years.

Expectations of future activity moderated only slightly from March’s peak, which had been the highest since comparable data first began in 2012.

The positive business mood and strong order book situation in turn prompted firms to take on extra staff at the fastest rate since July 2007.

Meanwhile, price pressures remained elevated. Input cost inflation revived to match February’s near six-year peak, while average prices charged for goods and services rose at a rate only marginally lower than March’s near six-year high.

By country, faster business activity growth in France was offset by a moderation in Germany.

The French composite output index rose to a 71-month high of 57.4 in April from 56.8 in March.

In the service sector, activity increased for the tenth time in as many months. Moreover, the rate of expansion accelerated to a 71-month high and was sharp overall.

The services PMI rose unexpectedly to 57.7 in April from 57.5 in March. The reading was forecast to fall to 57.0.

At the same time, manufacturing output also continued to rise markedly, and at the fastest pace in six years. The factory PMI improved to 55.1 from 53.3 a month ago, while it was expected to drop to 53.1.

In Germany, the composite PMI fell to 56.3 in April from 57.1. This signaled the first easing in the growth of private sector business activity since the start of the year. Nonetheless, this was the second fastest pace of growth in over three years.

There were slightly weaker increases in output at both service providers and manufacturers in April.

The…

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