London- In March, it is noted that the business activities of the euro area have increased. As per the preliminary figures on Wednesday, it is found that economies are stimulating for the third wave of Covid-19 infection may ruin any retrieval.
IHS Markit’s flash composite PMI for the eurozone might take a look at the activity across the different manufacturing and services that may hit 52.5 in March and 48.2 in February. Well, the reading above 50 represents an expansion in economic activity.
Undoubtedly, the preliminary data points present on the first economic expansion in the region at least from September and the largest starts increasing from July.
Chris Williamson, a chief business economist at IHS Markit mentioned in a statement, “The eurozone economy beat expectations in March, showing a much better than anticipated expansion thanks mainly to a record surge in manufacturing output.”
Notably, manufacturing has become one of the biggest drivers of economic performance this month. It is found that the service sector has received the hardest hit by the pandemic. Also, it has experienced an improvement that hitting a seven-month high. However, there remains concerned about how the eurozone economy will be performing in the second quarter as you will find that social restriction remained a reality. In Germany, it is already announced that they will be extending its lockdown and extending its strict restrictions during the Easter weekend. Moreover, France, Paris and about 14 other regions are in lockdown mode due to the increase of infections. Well, Poland has also announced tougher movement restrictions.
Williamson mentioned, “The outlook has deteriorated, however, amid rising COVID-19 infection rates and new lockdown measures. This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers benefit from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restrictions.”
However, the European Central Bank has estimated that the GDP rate has increased by 4% for the euro area and 4.1% for 2022. The forecast is depended on the evolution of the pandemic and the pace of vaccination in the regions.
Improvement of French activity
On Tuesday, France has announced the more intense vaccination campaign will take place in the upcoming days. Those who are above the age of 70 need to get vaccinated from Saturday onwards. Moreover, more vaccination centers need to be developed for intensifying the rollout from the starting of the next month.
As per the latest data of the business activity in the country within the three-months is quite high although it is still in contraction territory. However, France’s flash composite outcome index stood at 49.5 in March from 47.0 in February.
Eliot Kerr, an economist at IHS Markit mentioned, “Activity trended towards stabilization, reversing the downward momentum seen in January and February … That said, there remain ongoing challenges related to the pandemic.” He also added, “Firstly, raw material shortages continued to drive costs sharply higher, which may act as a squeeze on profit margins until the recovery in demand conditions gathers pace. Secondly, the threat of setbacks to the reopening of the economy remains tangible.”
German Manufacturing touches the record level
In the meantime, the German manufacturing sector kept on delivering Europe’s largest economy. Its flash composite output index reached 51.1 in February to 56.8. Thus, it represents a 3-month high.
Well, the positive economic activity was supported by the increased record in manufacturing output which raised around 68.5 in March.
Phil Smith, associate director at IHS Markit, said in a statement, “The sustained upturn in the factory sector has seen the manufacturing PMI reach unprecedented heights, with growth in global demand for German goods showing no signs of abating and businesses reporting that previously-delayed investments are now being realized.” He even added, the supply chain is under pressure and it enhances the factory input costs at a rapid rate.