The April PMI for the manufacturing sector in the eurozone was 45.6, down from 46.1 the previous month. The reading was worse than forecasts, which had anticipated a figure of 46.5. Once again, we particularly focus on the reading from Germany, where at the beginning of the year it seemed that the industry had passed its lowest point, with a PMI of 45.5. However, the industry fell into another slump, and the German economy, which is heavily dependent on manufacturing, shows further weakness. In April, the index for the manufacturing sector was 42.2. A similar trend is observed in France, where the index in April was 44.9 (compared to 47.1 two months earlier).
The situation is different in the services sector. The PMI index for the eurozone in this sector rose to 52.9 from 51.5 the previous month. The reading is a positive surprise, with the market consensus at 51.8. The services sector is in significantly better condition than manufacturing. Data from Germany also stand out here. The index for the services sector was 53.3 points, with forecasts only predicting a rise to 50.6 points.
The composite PMI index was 51.4, up from 50.3 the previous month. The reading is significantly above the 50-point mark. Despite the persistent weakness in the manufacturing sector, a strong rebound in the services sector allowed for an increase in the aggregated index. The sustained good performance in the services sector will help avoid recession in the coming quarters.
Data from the services sector will be closely analyzed in the context of the ECB’s monetary policy. Market participants expect the first interest rate cut in June. However, the question remains whether inflation in the services sector will persist, which could influence further decisions and the pace of rate cuts.
Bartosz Wałecki, Analyst at Michael / Ström Brokerage House
