Eurozone PMI data for March offered fresh signs of economic stabilization, with Composite index rising to a 7-month high of 50.4, supported by a notable rebound in manufacturing. The PMI Manufacturing rose from 47.6 to 48.7, its highest level in 26 months. Manufacturing output crossed into expansion territory at 50.7, a 34-month high. Services PMI slipped slightly from 50.6 to 50.4, but remained in growth territory.
Cyrus de la Rubia of Hamburg Commercial Bank noted the possibility that “temporary tariff-related import boom” could be inflating manufacturing figures. But he also expressed optimism that with, Europe’s investment drive in defense and infrastructure, “hope for a more sustained recovery seems well founded”.
Encouragingly for ECB, pricing pressures in the services sector are easing, with both input costs and output prices decelerating. In manufacturing, price pressures remain moderate as well, helped by falling energy costs.
However, risks remain. Potential retaliation tariffs from the US, trade tensions with China, and higher food prices caused by extreme weather events are all sources of uncertainty that could cloud the outlook and “make some ECB members hesitant to cut rates too aggressively.”
