Eurozone growth slows as manufacturing rises, services stall
The HCOB Composite PMI Index for the eurozone dropped from 50.9 in March to 50.4 in April, indicating the fourth consecutive month of expansion, albeit at a marginal pace. This result suggests a slowing momentum in business activity growth compared to the previous month.
The April resurgence was almost solely driven by the manufacturing sector, where production saw the fastest increase since March 2022. In contrast, activity in the services sector nearly stalled after four months of slight expansion, with the services PMI index falling to 50.1 from 51.0 in March.
Among the eurozone countries with available Composite PMI data, four recorded an increase in total activity at the start of the second quarter. France was the exception, registering a decline in activity for the eighth month in a row. Ireland saw the greatest increase in activity, although its expansion slowed in April. Italy experienced its fastest growth in eleven months but still lagged behind Spain, even though Spain's growth slowed to its lowest level in fifteen months.
A prolonged period of weak demand has constrained economic growth in the eurozone. New orders fell for the eleventh consecutive month in April, with the pace of decline slightly accelerating. Both manufacturers and service providers reported a drop in sales in the latest survey period.
Employment rises despite decline in business confidence
A sustained decrease in new order volumes meant that maintaining activity levels relied heavily on backlogs of orders. Consequently, backlogs of orders decreased at the start of the second quarter, continuing a trend observed for over two years.
Employment in the eurozone's private sector increased again in April, despite a notable decline in business confidence. However, job growth was seen only in the services sector, as the manufacturing sector recorded job cuts for the twenty-third consecutive month. Overall, employment growth was modest.
The increase in recruitment activity occurred despite a significant drop in business confidence. Expectations for activity over the next twelve months were at their weakest in eighteen months, reflecting lower confidence from both manufacturers and service providers.
April survey data showed more moderate inflation rates in the eurozone. Input cost pressures eased to their lowest level in five months, while the growth in prices charged was the slowest this year.
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that "eurozone economic growth slowed at the start of the second quarter, following a pick-up in the first three months of the year. The services sector, which is a major player, practically stagnated in April."
The economist further remarked that "In the services sector, cost pressures are still relatively high, though they have eased a bit over the past couple of months. Inflation is down for sales prices and continued to trend lower… These latest figures seem to support the ECB’s stance."
