Having contracted every month since June last year, Eurozone business activity finally expanded again in March. At 50.3, the final composite output index crept back above 50 to stand 0.4 points stronger than its flash estimate and 2.1 points clear of its final reading in February.

The return of positive growth was wholly attributable to services where the 51.1 flash sector PMI was revised up to 51.5, also its best print since the middle of 2023. For the first time in nine months new orders rose despite continued weakness in exports and this helped to ensure another above average gain in employment. Backlogs still declined but at a notably slower pace than in February business expectations for the coming 12 months hit their highest level since February 2022. Indeed, they exceeded the survey average for the first time in two years. Input cost inflation slipped to an 8-month low despite another steep monthly rise while output prices recorded their smallest gain since last November.

In terms of national composite PMIs, the best performing member state was Spain (55.3) which, alongside Italy (53.5) and Ireland (53.2), achieved positive growth. France (48.3) and Germany (47.7) remained in contraction territory.

Overall, the updated March results are consistent with a gradual turnaround in the Eurozone economy. However, momentum remains sluggish and manufacturing is still in the doldrums. Nonetheless, the ECB should be cautiously content with today's report and financial markets will remain focussed on a possible interest rate cut in June. More generally, the revised data put the Eurozone RPI at 12 and the RPI-P at 28. Economic activity may be lethargic, but it is at least running slightly ahead of market forecasts.

No revisions are expected leaving the composite output index at 49.9, up from February's final 49.2.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

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.