Eurozone Services Activity Lifts Private Sector Growth To 11-Month High

Eurozone Services Activity Lifts Private Sector Growth To 11-Month High

May 4, 2023

The euro area private sector economy expanded at the fastest pace in almost a year in April solely reflecting the growth in services activity, final data from S&P Global showed Thursday.

The HCOB final composite output index improved to 54.1 in April from 53.7 in March.
The score has remained above the crucial 50.0 level for the fourth straight month. However, the reading was below the flash estimate of 54.4.

The manufacturing sector contracted for the tenth consecutive month in April with the latest drop being the biggest since May 2020. Meanwhile, the upturn in the service sector was the fourth in as many months and well above the average in the survey history.

The services Purchasing Managers’ Index advanced to 56.2 from 55.0 in the previous month, the survey showed. The flash reading was 56.6.

The overall private sector growth strengthened to an 11-month high, following accelerated upturns in both February and March.

New order inflows grew the most since May 2022. That said higher business was limited to domestic market. Export orders decreased for a fourteenth month in a row.

The increase in business activity again outpaced the improvement in orders. As a result, backlogs of work declined further.

Firms lifted employment for a twenty-seventh straight month in order to tackle their unfilled orders. The pace of job creation was the biggest since last May.

Regarding prices, the survey showed that input price inflation eased to a 26-month low in April despite rising wage costs. Output prices increased at the weakest pace in two years but remained historically sharp.

Although firms remained optimistic towards the next twelve months, the degree of positivity weakened slightly to a three-month low.

“Across all HCOB PMI indicators, however, everything suggests that growth in the eurozone services sector will continue in the months ahead,” Cyrus de la Rubia, Hamburg Commercial Bank chief economist said.

The survey showed broad-based growth across the member countries. Spain was once again the fastest growing economy and Italy posted the strongest upturn in one-and-a-half years. Italy and Spain were the main driving forces behind the private sector growth. Stronger momentum was also reported in Germany and France.

Germany’s private sector growth quickened to a one-year high in April, underpinned by faster growth in services activity. At 54.2, the composite output index rose from 52.6 in March. The reading was also above the flash 53.9.

The services PMI advanced more than initially estimated to 56.0 from 53.7 in the previous month. The flash score was 55.7.

However, France’s private sector growth slowed in April as the improvement in services activity was restrained by the biggest fall in manufacturing output for nearly three years.

The composite PMI slid to 52.4 from 52.7 in the previous month and also remained below the initial estimate of 53.8. The services PMI advanced to 54.6 from 53.9 in March. The flash score was 56.3.

Italy’s private sector showed a two-speed performance in April. Manufacturing output shrank for the first time in 2023, while services activity grew the most since August 2021.

The composite output index rose only marginally to 55.3 from 55.2. The services PMI posted 57.6 in April, up from 55.7 in March and economists’ forecast of 56.5.

Spain’s private sector expanded markedly in April. However, the corresponding indicator dropped to 56.3 from 58.2 in March. At the same time, the services PMI registered 57.9, down from 59.4 a month ago. The score was forecast to improve to 59.9.

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