Euro zone business growth worse than expected in March -PMI
* PMI points to Q1 GDP growth of 0.2 pct - IHS Markit
* March factory PMI below all forecasts in Reuters poll
* Forward looking indicators paint downbeat picture
(Adds comment, details)
By Jonathan Cable
LONDON, March 22 (Reuters) - Businesses across the euro zone
performed much worse than expected in March as factory activity
contracted at the fastest pace in nearly six years, hurt by a
big drop in demand, a survey showed on Friday.
While a downturn in manufacturing was partly offset by
stable - yet relatively weak - growth in the euro zone's
dominant services industry, the surveys suggested the bloc's
economy had a poor first quarter.
That supports the European Central Bank's change of tack
earlier this month. It pushed out the timing of its next
post-rate increase until 2020 at the earliest and said it would
offer banks a new round of cheap loans to help revive the
IHS Markit's Flash Composite Purchasing Managers' Index,
which is considered a good guide to economic health, dropped to
51.3 this month from a final February reading of 51.9, missing a
Reuters poll median expectation for 52.0.
"The March decline in the euro zone's PMI indicates the
bloc's economic problems are far from over. Today's PMI
indicates that GDP growth is unlikely to have bounced back in
Q1," said Bert Colijn at ING.
IHS Markit said the PMIs pointed to first-quarter GDP growth
of 0.2 percent, below the 0.3 percent predicted in a Reuters
poll last week. The economy expanded 0.2 percent in the final
three months of 2018, its slowest pace in four years.
The flash manufacturing PMI sank to 47.6 from February's
49.3, its lowest reading since April 2013 and well below the 50
mark that separates growth from contraction.
A Reuters poll had predicted a modest rise to 49.5 and even
the most pessimistic economist surveyed had predicted a reading
An index measuring output, which feeds into the composite
PMI, plummeted to a near six-year low of 47.7 from 49.4.
German manufacturing contracted further this month, a sister
survey showed, compounding fears that unresolved trade disputes
are exacerbating a slowdown in Europe's biggest economy.
"Far from easing, as many had anticipated, the German
manufacturing recession is getting worse," said Andrew
Kenningham at Capital Economics.
Meanwhile, French business activity slowed unexpectedly as a
recent rebound ran out of steam in the face of deteriorating
Highlighting the struggles faced by factories in the region,
the new orders index dropped to 44.5 from 46.3, a level not seen
since the end of 2012. Casting more shadows on the outlook,
companies ran down old orders and raw materials and built up
stocks of completed goods.
Growth in the services industry slowed in line with a
Reuters poll. Its PMI dipped to 52.7 from 52.8.
And some of that activity came from completing old work. The
backlogs of work index fell to 49.0 from 51.0, only the second
time it has been sub-50 in almost three years.
Adding to the melancholy picture, services slowed their
So with forward-looking indicators turning increasingly
downbeat, optimism about the year ahead waned. The composite
future output index dropped to 59.9 from 60.6.
(Editing by Larry King)
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