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Eurozone economy gets back on track to recover

Autor: Financial Market
2 min

The economy is undoubtedly in a volatile phase right now, as evidenced by the confusing recent first quarter survey data. The PMI (which rose from 52 to 54.1 in March) was much more optimistic than the economic sentiment indicator, which fell from 99.7 to 99.3 this month.

Both surveys are concerned about manufacturing output, but the European Commission survey appears to be more cautious about developments in the services sector.

The manufacturing survey shows a slight improvement in new orders, but at a low level. Inventories also remain quite high. The previously observed production trend declined in March, but remained above the level of the second half of last year.

Overall, it looks like the industry has benefited from the easing in the supply chain, which has contributed to the reduction in backlogs. Given the weak order situation, it’s only logical that production expectations are falling again.

Euroarea Composite PMI.

In services, we see a decline in the development of business conditions. Demand has fallen slightly, but overall it looks as if the demand recovery of December and January has now come to an end.

Companies in the services sector are more optimistic about the outlook again, but at the moment the survey points to moderate activity in this sector.

In the retail sector, high inventories are contributing to a deterioration in sentiment. The sales indicator remained at a high level in March, but declined slightly compared with February.

Sales price expectations fell across the board in March. Price expectations in manufacturing and construction are falling rapidly and may soon reach pre-Covid 19 pandemic levels.

In retail and services, the decline has been smaller so far, and a large percentage of firms still intend to raise prices, but the trend has been downward for several months.

Does anyone dare predict a soft landing at this point? We’ll believe it when we see it, but recent survey data at least points in that direction, with inflation expectations falling and economic activity recovering somewhat – albeit at a weak level.

Article based on a story from ING Bank as copyright owner