Good news has arrived in Europe – is the recovery coming?

By RockedBuzz 7 Min Read

After February, the German business sentiment strengthened in March as well, which was supported by the revival of the service sector. Although the manufacturing industry confidence index fell, its impact on the composite index was smaller.

According to S&P Global’s German flash report, the Purchasing Managers’ Index rose to 52.6 points in March from the final value of 50.7 in February and exceeded analysts’ expectations of 51.0. March was the second month in a row that the indicator was above the 50 level indicating an increase in activity, indicating an exit from the energy crisis.

The index tracks the service and manufacturing sectors, which together account for more than two-thirds of the German economy. “The services sector was the engine of growth in March,” said Phil Smith, deputy chief economist at S&P Global Market Intelligence. Of course, there is bad news in this: the service sector is “increasingly becoming a major source of inflationary pressures as the pricing power of manufacturing declines,” Smith said.

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The index of the service sector has been showing growth for the third month, rising to 53.9 in March from the final value of 50.9 in February. In contrast, manufacturing fell to 44.4 in March from a final reading of 46.3 in February, remaining in contraction territory for a ninth straight month.”Manufacturing currently lacks momentum, with new orders continuing to decline amid customer caution and excessive inventory levels ” said Smith. “Unsurprisingly, growth expectations for the sector remain low.”

The French bmi, also published today, also paints an encouraging picture of the economy. The composite index rose to 54 points from 51.7 in February, which analysts expected only a minimal increase, 51.8 points. The results of the manufacturing industry are also weak here, but unlike Germany, the French sub-index was able to rise, from 47.7 points to 47.7. In the case of the service sector, the indicator jumped from 53.1 to 55.5, while experts expected a fall.

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It is interesting that despite the good economic data, the euro weakened against the dollar on the foreign exchange market. The reason for this is probably more bad news from the European banking sector, which sent the euro down in the morning, but the fall has stopped since the BMIs came out.

Development of the EUR/USD exchange rate

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Cover image: Getty Images

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