Euro area flash service PMI index rises in April, manufacturing PMI falls again

Euro area’s flash purchasing manager’s index for the service sector rose in April, against expectations. The PMI for service sector, which was closely linked with the year-on-year growth rate of real GDP in the past, rose to 55 from 54.9. However, this signifies that it continues to be three points below the January level, showing a more moderate growth rate. Meanwhile, the flash PMI for manufacturing continued to fall sharply in April. The manufacturing PMI dropped by 0.6 points to 56, totally reversing the surge recorded at the end of 2017.

The data released today affirms the expectation that the euro area economy has shifted down a gear at the beginning of this year, noted Commerzbank in a research report.

“Available data leads us to expect that in the first three months of 2018 the economy expanded by only 0.4 percent at most on the final quarter of 2017”, stated Commerzbank.

This compares with an average economic growth rate of 0.6 percent in the five preceding quarters. This softer growth could be partially explained with a weather-induced drop in construction output. Currently, headwinds are mainly felt from foreign trade. The stronger euro is a hindrance on exports. Furthermore, the U.S. government’s protectionist policy is unsettling businesses.

“We expect a first small hike of the deposit rate by 0.1 percentage points to -0.3% in autumn 2019 at the earliest”, added Commerzbank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 16.325, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 68.7654. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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