|Composite - Level||54.1||54.0||53.3|
|Services - Level||54.3||54.2||53.7|
Service sector activity in March was just marginally weaker than originally thought. Hence, the final sector PMI posted 54.2, just a tick below its flash estimate and 0.5 points above its final February reading. As a result, the final composite output index weighed in at 54.0, also 0.1 points below its original print but 0.7 points higher than in mid-quarter and an 11-month high.
New business and employment saw fresh gains, the latter recording an increase for a fifth straight month and at a rate close to February's near 4-year record. Backlogs were also up for a second successive month and, significantly, business optimism for the year ahead climbed to a 46-month peak. Deflationary pressures eased slightly. Hence, input cost inflation accelerated to an 8-month high and another decline in output prices (the fortieth in a row) was the least marked since June last year.
In terms of composite output indices, the best performer was Ireland (59.8) ahead of Spain (56.9) and Germany (55.4). Italy (52.4) recorded an 8-month high but France (51.5), while on the right side of 50, remained largely out of touch with the others and registered a 2-month low.
Overall, it looks as if Eurozone economic activity picked up some momentum during the course of the first quarter. Taken at face value the indications are that the economy expanded by around 0.3 percent. This is good news but something much stronger will be needed to tackle underlying deflation pressures and the improvement in business activity should not disguise the need for the ECB's new QE programme to be pursued aggressively.
The Eurozone Composite PMI is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 manufacturing and services firms. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland.
The Eurozone Services PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of around 2,000 private service sector firms. National data are included for Germany, France, Italy, Spain and the Republic of Ireland. These countries together account for an estimated 80% of Eurozone private sector services output.
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.