Purchasing managers’ indices signal a good start for the second quarter

Sentiment among European purchasing managers points towards a sound economic backdrop in the European Monetary Union. According to today’s advance release based on around 85 percent of the answers of the purchasing managers surveyed, the trend barometers not only remain at a high level but could even come in slightly above the high March values. This is reflected in the comprehensive composite purchasing managers’ index, which encompasses the sentiment in the entire private economy. It improved once again by 0.3 points to 56.7 index points in April, which is the highest level in the last 72 months. Both the services and the manufacturing sector reported an improvement in sentiment. With regard to individual countries, better sentiment figures in France and the other countries more than compensated for the slight deterioration of sentiment among the German purchasing managers at a high level. According to the survey results, the monetary union’s economic recovery is therefore broad based.

According to the purchasing managers’ survey, the assessments of the German manufacturing companies and of the service industry remained very robust at the start of the fourth quarter too. However, it was not quite possible to maintain the good sentiment figures from March. The indicators eased slightly in the two sectors – manufacturing and services – but remained significantly above the neutral level of 50 index points. The composite index declined by 0.8 points to 56.3 points in April according to the advance release. All in all, the purchasing managers assessed production, the order situation and employment as being as good as before, although growth was slightly weaker month-on-month in some sub-segments. The pace of economic expansion overall is likely to have weakened only slightly – if at all – at the start of the second quarter of 2017 relative to the first quarter. We predict German economic growth of +0.6 percent for the first quarter.

The mood among French purchasing managers was very good in April. At any rate, the first round of the French presidential elections offers no reason to have a more sceptical view of the current economic situation and expectations. According to the advance release, the comprehensive composite purchase managers’ index rose from 56.8 to 57.4 index points in April. This means that the index is not only significantly above the neutral mark of 50 index points; anything above this level signals an increase in economic growth. It is in fact the highest level for 71 months. Sentiment has improved in both the services and the manufacturing sector. The French economy is likely to have continued on its upward trajectory and started the second quarter on a positive note. Economic growth in the first quarter is expected to have been in the region of +0.4 percent.

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