Euro-Area Services Output Stays Close to 2011 High as ECB Meets

Customers Eat Outside a Restaurant in Toulouse
Customers sit and eat at tables outside a restaurant in Toulouse. Photographer: Balint Porneczi/Bloomberg

Euro-area services output remained close to the highest level since 2011 in March, signaling that the economic recovery in the 18-nation euro area is on track.

An index based on a survey of purchasing managers slipped to 52.2 from 52.6 in February, London-based Markit Economics Ltd. said in a statement today. While that’s less than the initial estimate of 52.4 published last week and below the median of 29 forecasts in a Bloomberg News survey, the data show that the euro area is still set to grow at the fastest rate in three years, said Chris Williamson, Markit’s London-based chief economist.

The report supports the European Central Bank’s projection that the euro-area economy will return to full-year growth in 2014 and could serve as an argument for policy makers to refrain from cutting interest rates today. At the same time, with inflation in the currency bloc well below the ECB’s target, some officials have argued in favor of more stimulus.

Survey data “confirm that the recovery is broad-based,” Williamson said in an e-mailed comment. “The region’s recovery in terms of economic growth is in line with policy makers’ expectations, but the concerns will lie with the price data.”

Inflation unexpectedly fell to 0.5 percent last month, the lowest level in more than four years, with Spain becoming the fifth country after Greece, Cyprus, Portugal and Slovakia to report an annual price decline. The ECB aims to keep inflation just below 2 percent, and President Mario Draghi renewed a vow on March 25 to “take additional monetary policy measures” if “any downside risks” appear to its forecasts.

ECB Decision

The ECB will announce its monthly interest-rate decision at 1:45 p.m. in Frankfurt today. Officials will leave the benchmark rate unchanged at a record low of 0.25 percent, according to 54 of 57 economists in a Bloomberg News survey.

The euro-area economy grew at a slower pace in the fourth quarter than initially estimated. Eurostat, the European Union’s statistics office, yesterday revised the rate of expansion to 0.2 percent from the 0.3 percent reported on March 5.

Markit’s gauge of factory output in the euro area stayed close to the highest level since 2011 in March, with the index falling to 53 from 53.2 in February, the company said on April 1. The composite index for services and manufacturing declined to 53.1 from 53.3, according to today’s report. A measure of new orders slipped to 52.5 from 52.6.

Final PMI data indicate economic growth of about 0.5 percent in the first quarter, Markit’s Williamson said.

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