LONDON, March 24 (Reuters) - Business activity across
the euro zone unexpectedly accelerated this month as consumers
splashed out on services, but weakening demand for manufactured
goods deepened the downturn in the factory sector, a survey
showed.
S&P Global's flash Composite Purchasing Managers' Index
(PMI), seen as a good gauge of overall economic health, bounced
to a 10-month high of 54.1 in March from February's 52.0, data
showed on Friday.
That was well above the 50 mark separating growth from
contraction and above all forecasts in a Reuters poll which had
predicted a dip to 51.9.
"The euro zone economy is showing fresh signs of life as we
enter spring. The survey is consistent with GDP growth of 0.3%
in the first quarter, accelerating to an equivalent rate of 0.5%
in March alone," said Chris Williamson, chief business economist
at S&P Global.
A Reuters poll earlier in March predicted a 0.1% contraction
in gross domestic product (GDP) this quarter.
Solid demand, at a 10-month high, meant firms were unable to
complete all orders for the first time since June. The backlogs
of work index rose to 50.1 from 49.5, just above breakeven.
A PMI covering the bloc's dominant services industry jumped
to 55.6 this month from 52.7, well above all forecasts in the
Reuters poll which had predicted a decline to 52.5.
To cope with the increase in activity firms took on
additional staff at the fastest pace since May last year. The
employment index bounced to 54.3 from 51.9.
However, it was a different picture for factories. The
headline manufacturing PMI fell to 47.1 from February's 48.5,
confounding expectations in the Reuters poll for an uptick to
49.0.
An index measuring output, which feeds into the composite
PMI, slipped back below breakeven to 49.9 from last month's
50.1.
"Growth is very unbalanced, driven almost solely by the
service sector with manufacturing largely stalled and struggling
to sustain production in the face of falling demand," Williamson
said.
Record improvements to supply chains meant the cost of raw
materials fell for the first time since June 2020, when the
COVID pandemic was cementing its grip on the world. The input
costs index slipped to 46.4 from 50.9.
That will likely be welcomed by policymakers at the European
Central Bank who increased interest rates last week, sticking
with their fight against inflation despite recent turmoil in the
banking sector.
(Reporting by Jonathan Cable; Editing by Susan Fenton)
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