Euro-Area Economy Accelerates Less Than Forecast on Services

(Bloomberg) -- Euro-area output accelerated less than forecast in March as activity in services came in slightly weaker than expected.

A composite Purchasing Managers' Index climbed to 56.4 from 56 in February, the highest level in almost six years, IHS Markit said on Wednesday. Even so, the reading is below a previous flash estimate of 56.7, with a gauge for services strengthening less than previously estimated.

“ The expansion recorded by the final PMI numbers was not quite the growth spurt indicated by the flash release, but still points to an impressive rate of economic growth,” said Chris Williamson, chief business economist at IHS Markit. The data suggest “a broad-based upturn among the euro's largest members.”

The European Central Bank has deployed unprecedented stimulus to rekindle the region's economy and fuel inflation, and has said it will continue doing so until at least the end of the year. President Mario Draghi has pointed to underlying weakness as evidence that stimulus is still needed, while some of his colleagues have started hinting at a debate on what might happen once the recovery becomes more sustainable.

Service-sector output rose less than forecast to 56 in March, according to the report, which was still the highest level since 2011. Overall, the composite number points to a first-quarter growth rate of 0.6 percent, IHS Markit said.

“Most welcome for a region still suffering near double-digit unemployment is a rise in the survey's employment index to its highest for almost a decade,” Williamson said. “Price pressures remain elevated, and look likely to feed through to higher consumer prices in coming months, but it seems likely that the ECB will hold its accommodative policy stance until at least later this year.”

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at  pgordon6@bloomberg.net.