Europe Services, Manufacturing Growth Slows More Than Economists Forecast
European Services, Manufacturing Growth Weakened in March
Guenter Schiffmann/Bloomberg
A Bayerische Motoren Werke AG employee assembles a BMW 6 Series cabriolet automobile at the company's factory in Dingolfing.
A Bayerische Motoren Werke AG employee assembles a BMW 6 Series cabriolet automobile at the company's factory in Dingolfing. Photographer: Guenter Schiffmann/Bloomberg
March 24 (Bloomberg) -- Bloomberg's David Tweed reports from Brussels where European leaders are meeting to sign off on measures aimed at drawing a line under the region’s sovereign debt crisis. (Source: Bloomberg)
European Manufacturing Growth Slows More Than Forecast
Guenter Schiffmann/Bloomberg
A Bayerische Motoren Werke AG employee welds body parts on a BMW 6 Series cabriolet automobile at the company's factory in Dingolfing.
A Bayerische Motoren Werke AG employee welds body parts on a BMW 6 Series cabriolet automobile at the company's factory in Dingolfing. Photographer: Guenter Schiffmann/Bloomberg
Growth in Europe’s services and manufacturing industries slowed more than economists forecast in March after surging energy costs and Japan’s earthquake clouded the global growth outlook.
A composite index based on a survey of purchasing managers in the 17-nation euro region in both industries fell to 57.5 from 58.2 in February, London-based Markit Economics said today. Economists forecast a drop to 57.8, the median of 16 estimates in a Bloomberg News survey showed. That’s still the second highest level since July 2007. A reading above 50 indicates expansion.
European companies have relied on faster-growing economies to fuel earnings after the fiscal crisis forced governments to step up austerity measures. In Germany, Europe’s largest economy, profits surged 129 percent over the past year, Bloomberg data show. While Japan’s earthquake has hurt investor confidence, the European Central Bank has signaled that it may raise borrowing costs next month to fight inflation.
“New orders growth and backlogs of work remain at elevated levels, which bodes well for output in the near term,” said Howard Archer, chief European economist at IHS Global Insight in London. “The ECB currently seems to be of the view that the Japanese and Libyan situation will not have a major impact on euro zone growth prospects and that an interest rate hike is warranted in April to contain inflation expectations.”
The euro was little changed after the release, trading at $1.4119 at 10:44 a.m. in Frankfurt, up from $1.4088 yesterday.
‘Upward Pressure’
An indicator measuring euro-region manufacturing growth fell to 57.7 in March from 59 in the previous month, Markit said. A gauge of service industries rose to 56.9 from 56.8 in February. That’s the highest since August 2007.
The euro-region economy may expand about 1.7 percent this year and 1.8 percent in 2012, the ECB said on March 3. The Frankfurt-based central bank had previously forecast growth to weaken to 1.5 percent next year. Inflation may average 1.7 percent this year, according to the ECB.
Crude oil prices have jumped 16 percent this year, trading at $106.35 a barrel today, as coalition strikes in Libya intensified, raising concern that supplies from Africa’s third- largest producer will remain halted. While the euro’s 5.4 percent ascent against the dollar this year has helped counter the impact of surging energy costs, it’s also undermining export growth.
‘Surge in Export Sales’
German investor confidence declined in March and exports unexpectedly dropped in January. Bayerische Motoren Werke AG Chief Executive Officer Norbert Reithofer said on March 15 that the world’s largest maker of luxury vehicles is “closely watching” the after-effects of Japan’s March 11 earthquake and the possible impact on Asian markets including China.
“Manufacturing continued to lead the recovery in terms of output and jobs, in part reflecting an ongoing surge in export sales,” said Markit Chief Economist Chris Williamson said in the statement. “The downside of the stronger growth is still further upward pressure on prices.”
The ECB, led by Jean-Claude Trichet, will hold its next rate meeting on April 7. The central bank has held borrowing costs at a record low of 1 percent and provided banks with emergency liquidity to bolster the region’s recovery.
To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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