Economy

European manufacturing expands again in March

Upturn in activity in March rounds off best quarter since early 2011

An employee works at a production line at a Wanxiang electric vehicle factory in Hangzhou, Zhejiang province. Activity in China’s factories slowed for a fifth straight month in March, a preliminary private survey showed on Monday, raising market expectations of government stimulus to arrest a loss of momentum in the world’s second-largest economy this year. Photograph: Aly Song/Reuters

Mon Mar 24 2014 - 11:30

Growth in euro-area manufacturing and services stayed close to the fastest since 2011 in March, as France improved, providing further evidence that the region's recovery is on track. Indexes for both industries based on surveys of purchasing managers were little changed from February, London-based Markit Economics said today.

A composite gauge slipped to 53.2 from 53.3 in February. The index has been above 50, indicating expansion, since July. The report follows European Central Bank Mario Draghi's prediction that a fledgling recovery from the sovereign debt crisis will gradually gain strength. Risks to that scenario include the euro's 6.2 per cent increase against the dollar in the past year and signs of slowing growth in China.

“The ongoing upturn in business activity in March rounds off the euro zone’s best quarter since the second quarter of 2011,” Chris Williamson, chief economist at Markit, said in a statement.

In China today, another survey showed manufacturing weakened for a fifth straight month, deepening concern the nation will miss its 7.5 per cent growth target this year. The Purchasing Managers' Index from HSBC Holdings Plc and Markit dropped to 48.1.

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The PMI report also highlights the risks of falling prices in the euro region, a threat that has prompted Draghi to pledge he will keep interest rates at a record low or lower “for an extended period of time.”

“With prices charged by manufacturers and service providers both falling again in March, there remains an argument for further stimulus, especially if the rate of growth of activity cools again in April,” Markit’s Williamson said. In France, manufacturing returned to growth for the first time in two years, with an index of factory activity rising to 51.9 in March from 49.7. Manufacturing in Germany slipped to a four-month low of 53.8 from 54.8 in February. The central bank is expected to keep its benchmark rate at 0.25 per cent for a fifth month in April, according to a Bloomberg survey of 41 economists published on March 13th.

Bloomberg

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