Euro-Area Deflation Risks Persist Even as Markit Sees Growth

Economic growth in the euro area probably picked up at the end of the first quarter, according to Markit Economics, which also said that concerns remain about the health of the region.

Markit’s composite Purchasing Managers Index of manufacturing and services rose to a three-month high of 53.7 in March from 53 in February. That keeps the measure well above the 50 level that separates expansion from contraction. The reading was also higher than the median forecast of 53 in a Bloomberg survey of economists.

While economic growth in the euro region is being maintained, Markit’s survey pointed to continued weak inflation pressures, with output prices falling again in March. The European Central Bank unveiled new stimulus measures this month as part of its long-running battle to revive inflation in the currency zone.

“Plenty of worrying signs persist,” said Chris Williamson, chief economist at Markit. “Deflationary pressures also remain stubbornly widespread as a lack of demand led to further discounting in March.”

Announcing the ECB measures on March 10, ECB President Mario Draghi said that growth momentum had been weaker than anticipated at start of the year but that he expects the economic recovery to “proceed at a moderate pace.”

Markit’s services index for the euro area rose to 54 this month -- a three-month high -- from 53.3. The manufacturing gauge increased to 51.4 from 51.2.

According to a separate report from Markit, German manufacturing grew at the slowest pace in 16 months in March, with an index at just 50.4. In France, the composite index rose to 51.1 in March from 49.3 in February, lifted by services.

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