The eurozone witnessed a near stalling of output growth in the private sector amid a reduction in new orders, according to the latest provisional PMI survey data for March.
The latest report reveals that the rate of input cost inflation accelerated sharply to the fastest in just over three years, while selling prices rose at a sharper pace, but the acceleration was much less pronounced than seen for input costs.
The seasonally adjusted S&P Global Flash Eurozone Composite PMI Output Index, based on approximately 85 percent of usual survey responses and compiled by S&P Global, posted 50.5 in March, above the 50.0 no-change mark for the fifteenth consecutive month and signalling a further expansion in business activity across the euro area.
That said, the latest reading was down from 51.9 in February, pointing to only a marginal expansion that was the weakest in ten months.
Manufacturing new orders continue to rise
The slowdown in eurozone growth was largely attributed to the near stagnation of business activity in the service sector. Meanwhile, manufacturing production increased modestly, and at a pace that was only slightly slower than that seen in February.
Output continued to rise in Germany, helped by the fastest expansion in manufacturing production in over four years, but fell again in France. Meanwhile, the rest of the eurozone posted only a slight expansion in activity, one that was the weakest in 27 months.
The softer expansion of output was registered amid a renewed reduction in new orders, the first in eight months. The decline was centered on services as manufacturing new orders continued to rise.
“New export orders decreased modestly again, despite a near-stabilization of manufacturing new export business. New orders from abroad have now fallen in each of the past 49 months,” added the report.
Tensions in the Middle East caused disruption to supply chains, with manufacturers reporting the most marked lengthening of suppliers’ delivery times in over three-and-a-half years. Meanwhile, companies scaled back employment marginally and were much less confident regarding the outlook for output over the coming year than had been the case in February.
“The survey data are indicative of eurozone GDP growth slowing to a quarterly rate of just below 0.1 percent in March with the forward-looking indicators pointing to a heightened risk of a downturn the coming months. The survey’s price gauge is meanwhile indicative of consumer price inflation accelerating close to 3 percent, with cost pressure likely to add still further to selling price inflation in the coming months,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Read: U.S. business activity growth falls to 11-month low in March, says S&P Global
Input cost inflation accelerates in March
A key feature of the March eurozone data was a marked acceleration in the rate of input cost inflation. Input prices increased at the fastest pace since February 2023. Steeper inflation was registered across both manufacturing and services, although the acceleration was more pronounced in manufacturing.
Rates of increase quickened in Germany, France and the rest of the euro area. With input costs rising sharply, eurozone companies also increased their selling prices at a faster pace in March, although the acceleration in inflation was much less pronounced than that seen for costs. Nonetheless, charges rose at the steepest pace since February 2024.
Business confidence fell sharply in the eurozone during March, and was the lowest in almost a year. The monthly drop in sentiment was the largest since the Russian invasion of Ukraine in early 2022. Companies continued to predict a rise in output over the coming year, but the degree of optimism was below the series average.
Lower confidence was seen in manufacturing and services alike, as well as across the three geographies covered by the flash PMI release, Germany, France and the rest of the eurozone.
