There will be fresh concerns surrounding the Eurozone economy as the final Markit Eurozone PMI services data fell to 53.1 from a flash reading of 54.0 and was also below February’s 53.3 reading. The composite output index managed to record only marginal growth for the month after a significant retreat from the flash reading.
The downward revision from the flash index was much larger than usually seen and reflected a sharp retreat in France and Italy. This pattern will cause concern given that business confidence should have received a boost from the aggressive ECB policy action at March’s council meeting and this would have been reflected more in the final data given survey timing. Failure to improve will raise concerns that underlying conditions deteriorated.
The French data will cause notable concern as the services sector failed to grow in March and there was also a weak reading for manufacturing. The Italian figure was at a 12-month low while, in contrast, there was robust growth in the Spanish and Irish economies.
The first-quarter performance was the weakest since the fourth quarter of 2014. There were subdued readings across all the main components with the employment index rising at the weakest rate since September 2015.
As far as prices are concerned, there a small increase in input costs and there has been a rise in input costs in every month for over six years, but output prices fell for the sixth successive month due to weak demand and strong competitive pressures. There will, therefore, be a further squeeze on margins which will maintain pressure for cost-cutting measures.
The Euro dipped lower to re-test support in the 1.1350 area as global risk concerns tended to dominate the session. The German Dax recorded sharp losses with the index down around 2.25% and close to the 9,600 level, while German bunds were sharply higher by close to 50 ticks on the day with 10-year yields at 0.09%.