Euro zone economy limped into the second quarter: PMI

A man reads a newspaper in downtown Lisbon
FILE PHOTO: A man reads a newspaper in downtown Lisbon January 23, 2013. REUTERS/Rafael Marchante

May 6, 2019

By By, Jonathan and Cable

LONDON, May 6 (Reuters) – The euro zone economy limped into the second quarter with lackluster growth as weakness in the manufacturing sector is increasingly affecting the bloc’s dominant services industry, a survey showed on Monday.

IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI), considered a good measure of overall economic health, dipped to 51.5 in April from March’s 51.6.

That was higher than an earlier flash reading of 51.3 but close to the 50 mark separating growth from contraction.

“The survey is indicative of the economy growing at a quarterly rate of approximately 0.2 percent, but manufacturing remained mired in its steepest downturn since 2013 and service sector growth slipped lower,” said Chris Williamson, chief business economist at IHS Markit.

In the first quarter the economy grew a surprisingly strong 0.4 percent, official data showed last week, but an April Reuters poll suggested growth would slow to 0.3 percent this quarter.

Once again some of that activity was generated by firms filling in past orders. The backlogs of work index was well below the breakeven mark at 48.6, not much higher than March’s more than four-year low of 48.2.

“Worryingly, growth of output continues to run ahead of that of new orders, meaning even the modest current growth of business activity is only being sustained by firms eating into orders placed in prior months,” Williamson said.

A PMI covering the services industry fell to 52.8 from 53.3. A factory PMI released last week showed activity contracted for a third consecutive month in April.

As a downturn in manufacturing usually spreads to services, optimism waned. The business expectations index for services firms dipped to 62.2 from 62.3.

(Editing by Toby Chopra; jonathan.cable@thomsonreuters.com; +44 20 7542 4688; Reuters Messaging: jonathan.cable.thomsonreuters.com@reuters.net)

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