Prior 51.9Composite PMI 50.7 vs 50.5 prelimPrior 51.9
The headline estimate is a 10-month low while the composite reading is a 9-month low. All of this now points to the notion that the euro area economic recovery from last year is taking an abrupt knock. That as new orders/business fall hard amid elevated uncertainty from the Middle East conflict.
Besides that, the surge in input price inflation was the most notable thing in the report. Input prices jumped to a 34-month high in March. That led to the strongest overall
increase in goods and services prices across the region since
February 2024.
HCOB notes that:
“March’s PMI indicates that the eurozone economy has already
been hit hard by the war in the Middle East. The encouraging
signs of growth seen earlier in the year have been eradicated
thanks to surging energy prices, choked supply chains, financial
market volatility and a renewed downturn in demand. The
accompanying surge in prices raises the unwelcome spectre of
stagflation, or worse, in the near-term.
“The near-stalling of growth in March drags the PMI’s signal for
first quarter GDP growth down to 0.2%. More worrying is that
there are clear risks of the economy contracting in the second
quarter unless there is a swift resolution to the conflict, and even
then we will likely see damaging energy market repercussions
extending into the coming months.
“New orders inflows have fallen in March for the first time since
last July, though the squeeze on spending from the rising cost of
living is likely only just beginning. Widespread reports of supply
bottlenecks arising from the war raise the risk of growth being
constrained further and pressure on prices intensifying.
“Higher prices have also raised the prospect of interest rate
hikes, with the European Central Bank taking a hawkish tilt to
prevent these near-term inflationary pressures from becoming
engrained.
“Hence business optimism about the outlook has slumped, which
has already hit hiring but will also dampen business investment.
“In this environment, it is likely that we will see increasing
numbers of economic forecasters also revise their growth
expectations lower for 2026 and maybe even pencil in a
contraction of GDP in the coming quarter.”
This article was written by Justin Low at investinglive.com.