Eurozone begins to pull out of recession - PMI

Business activity in the eurozone rose in April, suggesting the currency zone's economy began to recover after shrinking in the first quarter.

The IHS Markit composite purchasing managers' index rose to 53.8 in April from 53.2 in March and was slightly stronger than a preliminary reading of 53.7. A reading of 50 marks the difference between growth and contraction.

April's result was the second month of growth as manufacturing and services industries expanded. The final services business activity index rose to 50.5 from 49.6 and beat a preliminary estimate of 50.3. Manufacturing output was broadly in line with the strong showing in March.

The eurozone slipped back into recession in the first quarter of 2021 as output dropped 0.6%, official figures showed on Friday. The zone's economy contracted for the second month in a row with many countries in various states of lockdown to stem a rising tide of Covid-19 infections.

Germany's manufacturing sector helped the eurozone's biggest economy lead the way in April, recording an overall score of 55.8. Spain's 55.2 reading was a 25-month high and France recorded 51.6, an eight-month high. Activity in Italy dipped to a three-month low of 51.2.

Confidence in the outlook increased to the highest since composite data was first compiled in 2012. This prompted firms to hire more workers for the third month running and at the strongest pace for two years.

Chris Williamson, chief business economist at IHS Markit, said: “April’s survey data provide encouraging evidence that the eurozone will pull out of its double-dip recession in the second quarter. A manufacturing boom, fuelled by surging demand both in domestic and export markets as many economies emerge from lockdowns, is being accompanied by signs that the service sector has now also returned to growth.

“Barring any further wave of infections from new variants, Covid restrictions should ease further in the coming months, driving a strengthening of service sector business activity which should gain momentum as we go through the summer."

Cost pressures intensified but this was mainly due to stronger demand in manufacturing with some increases passed on to customers. Services costs rose modestly.