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Eurozone business growth unexpectedly slowed in April: PMI
[LONDON] Eurozone business growth unexpectedly slowed this month, despite further price discounts, providing disappointing news for the European Central Bank a day after it left monetary policy unchanged, a survey showed.
The ECB's swathes of cheap loans and interest rate cuts, alongside a top-up to its monthly bond purchases, appear to have had little effect on inflation or private sector growth.
Markit's Composite Flash Purchasing Managers' Index (PMI) for the eurozone, based on surveys of thousands of companies and seen as a good guide to growth, dipped to 53.0 from March's 53.1, matching a 13-month low in February.
A Reuters poll had predicted a rise to 53.2.
"We've been rangebound in the past year - there has been no pick-up. Clearly the central bank action has had no immediate effect, we'll have to wait for the corporate bond buying to hopefully kick in and drive growth," said Chris Williamson, chief economist at Markit.
The ECB has been easing policy aggressively, cutting rates deeper into negative territory and expanding purchases in a bid to prop up inflation. The central bank will begin buying corporate bonds in the second half of this year.
The ECB left policy unchanged on Thursday as it waits to see how the two stimulus packages announced since December play out.
Consumer price inflation did halt its fall in March, coming up to zero year-on-year, but still nowhere near the ECB's 2 per cent target ceiling.
Any reading below 50 signifies a contraction and the output price index has now been sub-50 for all but two months in the past four years. It came in at 48.9 in April, just above 48.6 in March.
Yet the price-cutting highlighted in Friday's survey had little effect on the bloc's dominant service industry where growth failed to live to up to expectations.
The services PMI was 53.2, above March's 53.1 but missing the Reuters poll median of 53.3.
A PMI covering manufacturing confounded hopes for a rise to 51.8, instead falling to 51.5 from 51.6. An index measuring output, which feeds into the composite PMI, slumped to 52.5 from 53.1.
The report also suggested May won't be much better. Factories barely increased buying the raw materials they need to manufacture products. The quantity of purchases sub-index fell to a one-year low of 50.1 from 50.9.
And services firms only managed to build a very small backlog of work, meaning they will have to rely on new orders next month. That sub-index nudged down to 50.1 from 50.2.
Markit's Mr Williamson said the PMI pointed to second quarter growth of around 0.3 per cent, below the 0.4 per cent predicted in a Reuters poll last week.