Eurozone PMI Reaches 11-Month High in April

The HCOB Flash Eurozone Purchasing Managers’ Index (PMI), published by S&P Global, recorded a figure of 51.4 in April, up from 50.3 in March, signalling growth for the 20-nation single currency bloc. This latest reading is the highest in 11 months and suggests that the eurozone is pulling out of a recent downturn.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated that the eurozone “got off to a good start in the second quarter.” Despite this positive development, the survey indicated that overall activity is growing “modestly,” with the manufacturing sector continuing to decline, albeit at a slower pace than in previous months. 

The robust growth in the service sector has been pivotal in offsetting the slump in manufacturing output. S&P Global noted that the service sector growth coincided with a “further moderation of the manufacturing downturn.”

Andrew Kenningham, chief economist at Capital Economics, remarked that the PMI data indicates the eurozone may be emerging from its recession, but it’s unlikely to deter the European Central Bank (ECB) from cutting interest rates in June. “While these surveys are good news for the economy, we suspect that any growth will remain quite weak in the near term,” Kenningham added.

Despite recent positive signals, the ECB’s rapid interest rate hikes, aimed at curbing soaring inflation, are now under increased scrutiny as eurozone inflation inches closer to the institution’s two-percent target. Inflation slowed to 2.4 percent in March, prompting calls for the ECB to consider rate cuts.

The survey also highlighted improvements in the EU’s two leading economies, France and Germany. Germany returned to growth in April, offering reassurance to Berlin amid concerns that its economy was dragging down the rest of Europe. France, meanwhile, experienced a “marginal contraction of output,” nearly stabilising.

These developments suggest a cautiously optimistic outlook for the eurozone’s economy. However, the mixed signals between manufacturing and services, coupled with inflation concerns and potential ECB interest rate cuts, point to continued uncertainty in the months ahead.