Euro area’s flash services PMI index falls surprisingly in April, economic growth to remain soft for some time

The euro area’s purchasing managers’ index for the service sector dropped surprisingly in April. Services PMI index dropped 0.8 points to 52.5. The index for the manufacturing sector, which is greatly responsible for the subdued growth in the past quarters, rose a bit from 47.5 to 47.8 after the surprising slump in March.

The data released today underpins the view that the euro area’s economy will continue to grow just slightly in the first half of 2019, noted Commerzbank in a research report. Nevertheless, the economy is still expected to pick up again in the second half of the year.

The headwind from foreign trade should gradually ease. The latest economic data from China indicate towards a stabilization of the Chinese economy. The issues of the automotive industry with the new emission test procedure might play just a small role in the second half of 2019.

Meanwhile, domestic demand, underpinned by the ECB’s expansive monetary policy and an increasingly expansive fiscal policy, is likely to continue to grow at a healthy rate.

“Accordingly, we assume that the phase of weak growth that has lasted since the third quarter of 2018 will end in the summer. In the second half of the year, the euro zone economy is likely to grow again at a slightly above-average rate, with quarterly growth rates of 0.4 percent. Nevertheless, only a meagre increase of 0.9 percent is likely to be recorded for 2019 as a whole. We are therefore somewhat more cautious than the consensus (1.1 percent)”, added Commerzbank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -79.4078 while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 88.5063 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex