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Euro-area order growth signals some hope

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Economic activity in the euro area showed signs of stabilisation in April, and there were nascent signs that the bloc's slowdown may be gradually bottoming out.

[BRUSSELS] Economic activity in the euro area showed signs of stabilisation in April, and there were nascent signs that the bloc's slowdown may be gradually bottoming out.

A composite Purchasing Managers' Index came in at 51.5 in April, little changed from March's 51.6, and a gauge for the service sector declined. Both readings were slightly higher than initial estimates, and order growth improved at the best rate since November.

Economic numbers have been mixed in recent weeks, sparking some hope that the bloc may finally be starting to overcome a weak patch that was at risk of becoming entrenched. First quarter GDP growth was stronger than expected, and inflation accelerated more than forecast last month.

Still, output is currently outpacing growth in new orders, as businesses struggle to generate sustainable demand, according to IHS Markit's report.

"The modest current growth of business activity is only being sustained by firms eating into orders placed in prior months," said Chris Williamson, chief business economist. "Demand clearly needs to improve further to generate faster economic growth and give firms greater pricing power."

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Even though oil prices rose in April - leading to higher input costs for many companies - Williamson noted that few were passing them on. Average selling prices rose at the weakest pace since August 2017.

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