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Euro zone businesses started second quarter with tepid growth – PMI

Euro zone businesses started second quarter with tepid growth – PMI

Euro zone businesses started the second quarter on the back foot, with growth unexpectedly slowing again as demand barely rose despite more modest price rises, surveys showed today.

The data comes a week after European Central Bank President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persists.

IHS Markit’s Flash Composite Purchasing Managers’ Index, which is considered a good guide to economic health, fell to 51.3 this month from a final March reading of 51.6.

The reading confounded the median expectation in a Reuters poll for a rise to 51.8.

“It’s still not in recession territory by any means but is pointing to rather subdued and uninspiring economic growth, and this is reflected in the gloomy expectations,” said Chris Williamson, chief business economist at IHS Markit.

Williamson said the PMIs, if maintained, indicated second-quarter GDP growth of just under 0.2%, below the 0.3% predicted in a Reuters poll earlier this month.

As new business barely increased in April – the sub-index only nudged up to 50.6 from 50.5, perilously close to the 50 mark dividing growth from contraction – there is scant sign of an imminent turnaround.

The downturn was again led by the bloc’s manufacturing industry.

While its PMI rose to 47.8 from March’s 47.5, it spent its third consecutive month below the break-even mark and was below a median forecast for 47.9.

An index measuring output, which feeds into the composite PMI, rose to 48.1 from 47.2 but for an eighth month factories ran down old orders to keep active.

The backlogs of work index fell to a more than six-year low of 44.4 from 45.

A PMI covering the bloc’s dominant service industry fell further than expected. It dropped to 52.5 from March’s 53.3, well below the median forecast in a Reuters poll for 53.2.

“We have further signs of a manufacturing-led slowdown spreading to services,” Williamson said.

Like their manufacturing counterparts with no meaningful increase in new business, service firms turned to filling old orders.

And suggesting they see little improvement in activity over the coming year, optimism waned. The business expectations index for services fell to 62 from 62.3 the previous month.

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