Euro zone business activity showed slight improvement in March – PMI

Euro zone business activity was closer to returning to growth in March, although the recovery was uneven as recovery in services activity accelerated, while strong downturn in manufacturing sector extended.

Eurozone composite Purchasing Managers’ Index (PMI), which tracks the performance in both, services and manufacturing sectors, rose to 49.9 in March from February’s 49.2 and topped 49.7 consensus, but sending warning signals as the index stays below the 50 level separating growth from contraction for the tenth consecutive month.

The PMI covering the bloc’s dominant services industry soared to a nine-month high of 51.1 this month from February’s 50.2, well above 50.5 forecast, marking the second consecutive month of growth and adding to growing positive signals.

On the other hand, manufacturing PMI fell to a three-month low of 45.7 in March from 46.5 previous month, far below 47.0 consensus, further souring the outlook for the manufacturing sector, although upbeat services numbers partially offset negative impact.

Economists remain cautiously optimistic but do not expect faster recovery in industrial sector soon and warn that sector’s negative performance will continue to weigh on overall economic activity.