Euro-area business activity expands faster than expected

Euro-area business activity expanded faster than economists forecast this month, signaling that a fragile recovery in the 19-nation region is becoming more sustained.

A Purchasing Managers Index for the manufacturing and services industries across the region rose to 54.1 from 53.3 in February, London-based Markit Economics said Tuesday.

Markit said its surveys suggest the euro-region economy grew 0.3 per cent this quarter, supported by a 0.4 per cent expansion in Germany, Europe's largest economy.

The currency bloc’s economy, overcoming its longest-ever recession, is gathering strength as the European Central Bank starts its large-scale asset-purchase program. While it may be too early to declare victory over the threat of a deflationary spiral of falling prices and households postponing spending, ECB president Mario Draghi has said that a sustained recovery is taking hold.

"The improvement provides welcome news to a region awaiting signs that the ECB's quantitative easing is stimulating the real economy," said Chris Williamson, chief economist at Markit in London. "Worries persist, however, in relation to Greece and Russia, which are a reminder that ongoing recovery is by no means assured."

A gauge of euro-area services rose to 54.3 in March from 53.7 in February, according to the release.

A similar index for manufacturing increased to 51.9 from 51. France, Germany The composite gauges for Germany and France were both well above the 50-point mark that divides expansion from contraction, according to earlier releases from Markit.

The German index advanced to 55.3 from 53.8, marking a 23rd straight month of growth. In France, the index slipped to 51.7 from 52.2. While that signals “modest” growth of about 0.2 per cent this quarter, the country is still seeing its best performance since 2011, according to Markit.

The report also showed that euro-area employment growth picked up this month, and prices charged for goods and services fell at a slower pace. Deflationary pressure “eased during the month, linked to higher wages and rising import costs resulting from the euro’s depreciation,” Mr Williamson said. “The survey data therefore indicate that the ECB’s quantitative easing has been started at a time when the euro zone’s economic upturn is already starting to gain traction.”

Reuters