The Euroland economy looks to have only expanded modestly in the first quarter, or so the renewed dampened sentiment among European purchasing managers would suggest.
According to IHS Markit’s survey of European purchasing managers, the index for industry saw the strongest decrease in six years. The service sector proved more resilient thanks to robust domestic demand, but here, too, the figure fell. On balance the composite PMI dipped 0.6 points to 51.3 points in March.
Industry in Germany and France were in decidedly poor spirits. In France, sentiment among service providers has also deteriorated. In the remainder of the Eurozone, according to IHS Markit, sentiment by contrast brightened slightly. Nevertheless, the survey results are a disappointment. They certainly do not speak in favour of Euroland economic growth picking up clearly in first-quarter 2019. This is in line with our forecast.
According to the survey among purchasing managers, German industry is having to contend with weak demand which squeezes on sentiment. The sub-index for industry slipped 2.9 percent in March, and slid to the lowest figure in 79 months, closing at 44.7 points. The drop in order receipts was probably very pronounced and more specifically orders for the export business. Moreover, hiring intentions fell for the first time in three years. The downturn in service sector sentiment was, by contrast, only restrained. And the composite PMI for Germany therefore declined in March from 52.8 to 51.5 points.
In France, purchasing manager sentiment sagged across the board. Both the figure for manufacturing and that for industry fell below the mark of 50 index points. The comprehensive composite PMI decreased from 50.4 to 48.7 points. Here, again, the decline was also caused by the greater decrease in order receipts. Precisely new export business, or so the IHS Markit data suggests, fell faster than in almost three years. Meanwhile, the purchasing managers polled indicated a more pronounced intention to hire. Nevertheless, the improvement was last this slow in December 2016.