Euro zone private sector recovery remains solid

The pace of the recovery in the euro zone’s private sector slowed slightly in March but remained close to the previous month’s two-and-a-half year highs, according to data released on Monday, while a return to growth in France indicated that the recovery in the region is broadening.

Euro zone business activity remains solid in March

The preliminary reading of the euro area’s composite purchasing manager’s index ticked down to a two-month low of 53.2 in March, only slightly lower than February’s 32-month highs of 53.3.

The euro zone’s manufacturing PMI edged down to 53.0 from 53.2 in February, in line with expectations.

The region’s services PMI came in at 52.4, down slightly from 52.6 in February, compared to expectations for an unchanged reading.

The report said growth in new orders accelerated at the fastest pace since May 2011 in March. Employment also rose slightly, increasing for a second month, providing the first signs of job creation since the end of 2011.

“The ongoing upturn in business activity in March rounds of the euro zone’s best quarter since the second quarter of 2011. The survey is signaling a 0.5% increase in GDP in the first quarter, building on the 0.3% increase seen in the final quarter of last year,” said Chris Williamson, chief economist at survey compiler Markit.

Germany’s manufacturing PMI fell to a four-month low of 53.8 this month, from a final reading of 54.8 in February and below forecasts of 54.6. The country’s services PMI declined to 54.0, from 55.9 last month.

The French manufacturing PMI rose to 51.9 in March, from 49.7 last month, ahead of expectations for an uptick to 49.8. France’s services PMI rose to a 26-month high of 51.4 from 47.2 in February, well above forecasts for a reading of 47.5.

The report noted that manufacturers and service providers cut prices again in March, adding to concerns over the risk of deflation in the euro area. The composite output price index fell to an eight-month low of 48.5 from 49.3 last month.

“There remains an argument for further stimulus, especially if the rate of growth of activity cools again in April,” Chris Williamson said.