Mixed European services and manufacturing PMI adds gloom

April data on German and French service and manufacturing sector was mixed, leading to a surprise fall in the eurozone composite PMI, according to 'flash' purchasing managers' index readings from Markit.

Germany's composite PMI for April dipped to a nine-month low of 53.8 from a reading of 54.0 in March, as poor service sector activity weighed against better manufacturing performance.

The manufacturing PMI for the euro-area's largest economy improved to 51.9 from 50.0, beating consensus forecasts for 50.7.

The service sector PMI fell to 54.6, short of predictions that it would remain at the 55.1 level from March.

France's manufacturing PMI for April slipped to 48.3, missing forecasts for a rise to 49.9 from the previous reading of 49.6.

French services PMI improved however to 50.8 from the prior month's 49.9 and beat consensus estimates of a rise to 50.1.

The euro-area composite PMI declined to 53.0 from 53.1, while the consensus forecast had been for a small increase, taking the index slightly below its first quarter average of 53.2.

Economists said the breakdown of the PMI suggested that a weaker domestic economy offset a pick-up in overseas demand.

Jack Allen at Capital Economics said the small fall in the eurozone composite suggested the weakening of the region’s activity surveys this year has been due to more than just concerns about overseas demand, which have eased recently.

He added that the eurozone PMI also suggested that underlying inflationary pressures remained fairly weak.

"We think that eurozone GDP growth will slow from 1.5% last year to about 1.2% in 2016, and inflation will remain below target. So the ECB will eventually come under pressure to loosen monetary policy further."