Wednesday 22 October 2014
 
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Euro zone recovery on track

London, March 25, 2014

US manufacturing growth was solid in the first quarter and a return to expansion in French business activity this month suggested a recovery was taking shape in the euro zone, though China's factory sector stuttered in the early part of 2014, surveys showed.

The US accelerated at a slower pace in March than the near four-year high hit in February, Markit's Flash Manufacturing Purchasing Managers' Index showed.

Despite the dip to 55.5 in March from February's 57.1, the 55.4 average reading for the three first months was higher than last year's fourth-quarter average of 53.8. Readings above 50 indicate expansion.

Weaker-than-expected readings from China meanwhile pointed to a contraction in the first three months of the year and will raise market expectations of government stimulus to arrest a loss of momentum in the world's second-largest economy.

A solid expansion in both the euro zone's manufacturing and services industries in March, and growth in its second-biggest economy France, meant the bloc's recovery pace barely slowed from February's two and-a-half-year high.

But the threat of deflation in the region was highlighted by surveyed firms' increasing willingness to cut prices to attract customers.

China's flash Markit/HSBC Purchasing Managers' Index (PMI) fell to an eight-month low of 48.1 in March from February's final reading of 48.5. The index has been below 50 since January, indicating a contraction in the sector this year.

Output and new orders both weakened but new export orders grew for the first time in four months, the survey showed, suggesting the slowdown has been driven primarily by weak domestic demand.

The euro zone's composite PMI, which is seen as a good growth indicator, edged down to 53.2 from February's 32-month high but Markit said it indicated a 0.5 per cent economic expansion this quarter.

Having lagged the recovery in much of the euro zone in recent months, France's index surged through the 50-point threshold to reach its highest level since August 2011, while German composite figures showed growth slowed from February's 33-month high but remained strong.

"The best news in March saw manufacturing and services output not only return to growth in France but expand at the fastest rate for 31 months. Meanwhile, German expansion was pretty robust," said Howard Archer at IHS Global Insight.-Reuters




Tags: recovery | Euro zone |

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