Business Activity in the Eurozone Increased in April

Business activity in the Eurozone increased in April thanks to a strong recovery in the services sector, which compensated for weak results in industry, according to a survey by S&P Global released on Tuesday.

The Purchasing Managers’ Index (PMI) in the Eurozone’s private sector rose by 1.1 points in April compared to March, reaching 51.4 points, as preliminarily calculated by Hamburg Commercial Bank (HCOB), which compiles reports for S&P Global. Values above 50 signal growth in activity, while those below indicate a decline.

– The Eurozone has made a good start to the second quarter. The preliminary HCOB PMI has made a significant leap into growth territory. The driving force was the additional acceleration of activity in the services sector – said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The trend is expected to extend into the coming months, given the increased demand for services in the past two months, which has translated into ‘bolder’ hiring plans, S&P notes. This assessment is also supported by more pronounced price increases for services, which reflect stronger growth in input costs, as well as companies’ ‘confidence’ in setting prices, alongside a parallel recovery in Germany and France, the two leading economies in the Eurozone.

– (The parallel recovery) signals the presence of common factors, such as lower inflation and higher wages that support purchasing power and help in the recovery of the services sector – the authors of the research emphasize.

The industry, on the other hand, recorded a decline again, albeit slightly less severe than in March.

– The best that can be said for the industry is that the decline in production in April was the mildest in the past year – HCOB points out. Demand remains weak, and unrealized orders have significantly decreased.

The manufacturing sector is expected to recover by mid-year, but HCOB warns of ‘structural factors’, noting that European industrial companies are increasingly facing competition from China, especially in the technology sector.

Business leaders have shown increased optimism in recent months, predicting a reduction in interest rates, easing of the cost-of-living crisis, and signs of recovery in household and company demand, but in April they were concerned about geopolitical uncertainty and fluctuations in financial markets.