LONDON (Reuters) - Businesses across the euro zone stumbled into the second quarter as demand remained weak despite more modest price rises, surveys showed on Thursday.
Growth stuttered in Germany and forward-looking indicators in its Purchasing Managers’ Index suggest a contraction among manufacturers in Europe’s largest economy will continue for a few more months at least.
“The big disappointment is that the German Manufacturing PMI was barely any higher than it was last month and, at 44.5, it points to a continuing industrial recession,” said Andrew Kenningham at Capital Economics.
The euro fell against the dollar after the worse-than-expected German data.
Activity in France, the bloc’s second-biggest economy, only stabilised this month after contracting in March. An unexpected rebound in services offset continued weakness in manufacturing.
Germany and France are the only two euro zone economies to report flash readings.
“A weighted average of the Composite PMIs for the rest of the euro zone must have dropped back again in April, so there may be more disappointing news to come from Italy and/or Spain when the final surveys are published at the end of the month,” Kenningham said.
Considered a good guide to economic health, IHS Markit’s flash composite euro zone PMI fell to 51.3 this month from a final March reading of 51.6, confounding the median expectation in a Reuters poll for a rise to 51.8.
“The euro area outlook is challenging to say the least, and the ECB remains tilted towards further easing measures,” said Jan von Gerich at Nordea e-Markets.
A week ago, European Central Bank President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persists.
IHS Markit said the PMIs, if maintained, indicated second-quarter GDP growth of just under 0.2 percent, below the 0.3 percent predicted in a Reuters poll earlier this month. [ECILT/EU]
New business barely increased in April - the sub-index nudged up to 50.6 from 50.5, close to the 50 mark dividing growth from contraction - and there is scant sign of an imminent turnaround.
The downturn was again led by manufacturing. 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 45.0.
A PMI covering the bloc’s dominant service industry fell more than expected, dropping to 52.5 from March’s 53.3, below the median forecast in a Reuters poll for 53.2.
Like manufacturers with no meaningful increase in new business, services 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 62.0 from 62.3.
Editing by Larry King