The ECB's 'aggressive stimulus' is finally driving a European recovery
According to Markit, the eurozone saw a composite PMI reading of 53, slower than the month before, and in line with initial estimates of growth during the month.
The purchasing managers index (PMI) figures are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity - so the higher the better. Wednesday's data is the final data of the month, following on from Markit's flash readings in late April.
Markit's statement alongside the data said (emphasis ours):
"The rate of eurozone economic expansion remained only modest in April. Output rose at a pace slightly below the average seen in the opening quarter of the year, with only moderate growth seen in both the manufacturing and service sectors."
"The 'big-four' nations all reported expansions of economic activity in April, with Spain seeing the steepest rate of increase. Output growth in Spain accelerated to a three-month high, despite a slower rate of increase for new business. Italy also saw a modest improvement in its rate of output expansion."
Here's what Chris Williamson, Markit's chief economist had to say (emphasis ours):
The final PMI data confirm the earlier flash estimate that the eurozone economy grew at a steady but unspectacular annual rate of 1.5% at the start of the second quarter. Prices charged also continued to fall, indicating that growth is being partly fuelled by price discounting.
However, while still tepid, the sustained eurozone growth contrasts with slowdowns in the US and UK, suggesting the ECB's more aggressive stimulus is helping to drive a steady recovery.
Further comfort can be drawn from the upturn in service sector business optimism for the year ahead, which has edged up since the start of the year to signal one of the highest degrees of sentiment seen over the past five years.
Here are the headline eurozone figures:
- Composite PMI: 53.0, in line with the flash estimate, but down 0.1 from March's 53.1 reading.
- Services PMI: 53.1, down from the 53.2 flash estimate, but flat since March
Markit's chart shows just how much Europe is struggling to find substantially, sustainable growth right now. Take a look:
- German Composite: 53.6, an 11-month low and down from 54 in March.
- German Services: 54.5, down from 55.1 in March to a six-month low.
- French Composite: 50.2, up from 50 in March to a three-month high.
- French Services: 50.6, a five-month high, and out of contraction. The March reading was 49.9.
- Italian Services: 52.1, a beat on the 51.7 reading expected, and well up from March's 13-month low of 51.2.
- Spanish Services: 55.1, down from 55.3 in March, but ahead of the 55 expected.
- Greek Manufacturing:
The PMI figures come just a couple of weeks after European Central Bank president Mario Draghi reiterated his belief that the bank's monetary policy measures are working to address sluggish growth and inflation in Europe.
"Overall, our measures in place since June 2014 have clearly improved borrowing conditions for firms and households" Draghi said at a press conference after the ECB left all of its bases rates unchanged on April 21.
Draghi did admit however, that risks to growth in the eurozone are "tilted to the downside." As a result, Draghi and the ECB will likely take heart from today's numbers.