Eurozone business activity steady in April

Business activity in the eurozone was steady in April, according to data released on Monday.

IHS Markit's eurozone purchasing managers' composite output index - which gauges activity in both the manufacturing and services sectors - was unchanged from March at 55.2, beating expectations for a drop to 54.9. The reading indicated the joint-weakest expansion of business output since the start of 2017, but remained well above the average of 53.8 seen over the past five years.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

Meanwhile, the services business activity index printed at 55.0 in April from 54.9 the month before, ahead of expectations for a reading of 54.6.

The manufacturing PMI slipped to 56.0 from 56.6 in March, which was a touch below the forecast 56.1.

Chris Williamson, chief business economist at IHS Markit, said: "Growth has downshifted markedly since the peak at the start of the year, but importantly still remains robust. The April data are running at a level broadly consistent with Eurozone GDP growth of approximately 0.6% at the start of the second quarter.

"The decline in the PMI from January’s high is neither surprising nor alarming: such strong growth as that seen at the start of the year rarely persists for long, not least because supply fails to keep up with demand. With recent months seeing record delivery delays for inputs to factories and growing skill shortages, output is clearly being constrained. In France, strikes were also reported to have disrupted growth, and may continue to do so in coming months.

"However, it’s also clear that underlying demand has weakened, in part due to exports being hit by the stronger euro. With companies’ future optimism having slipped to the lowest since last year, it looks likely that growth may well slow further in coming months."

Capital Economics economist Jack Allen said April’s PMI surveys suggest that the apparent sharp slowdown in the first quarter was not the beginning of a major downturn, although growth is unlikely to return to the rates seen last year.

"Overall, the data support our view that the ECB will make no major changes to its communications at Thursday’s meeting."