Euro Area in Rut as Confidence Slow to Respond to Draghi Action

Growth in the euro area’s services and factory sectors was little changed this month, failing to respond meaningfully to the European Central Bank’s latest round of stimulus.

In a monthly report, Markit said its composite Purchasing Managers Index slipped to 53 in April from 53.1 in March, with 50 the key dividing line between growth and contraction. Its survey also showed little change on average in optimism among service providers about the outlook.

The report comes a day after ECB President Mario Draghi said the stimulus the central bank unleashed in March is working and people must give it time to feed through. Nevertheless, inflation has struggled to stay above zero for the past year, and Markit said “even more aggressive policy action may therefore be required.”

“The euro-zone economy remains stuck in a slow growth rut,” said Chris Williamson, chief economist at Markit in London. “A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.”

The factory PMI for the euro area slipped to 51.5 this month from 51.6, while the services gauge rose to 53.2 from

53.1. While measures of employment growth and prices improved in April, Markit noted that these were rising “from low bases.”

It said that France remains a major drag on the region. While the French composite PMI rose in April, the factory gauge fell to an eight-month low of 48.3. In Germany, the combined measure slipped to a nine-month low of 53.8 from 54.

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