Final March Euro area services PMI to decrease from the flash estimate

The final estimate of the Euro area services index should print one tick lower than the flash (53.7 vs 53.6), decreasing from the March level (54.2). Looking at the regional breakdown, the flash estimate for the French services PMI dropped dramatically in April (from 52.4 to 50.8), Societe Generale expects the final estimate to be revised upward (51.2 vs 50.8). The Italian services index is likely to continue to recover, closing the gap with the other countries.

The composite index (the average of the manufacturing and services PMIs), which usually moves together with GDP growth is expected to mark lower as well, from 53.5 (flash) to 53.4. 

Looking ahead, the PMIs are expected to hover around the current levels. From a fundamental point of view, GDP growth will not exceed 1.6-1.9% yoy and observe that PMI are already at level consistent with that GDP growth range.

Indeed, lower oil prices, weaker euro, the easing of budgetary policies, lower interest rate are positive but their multiplier impact on the economy is set to be lower than during past recoveries, with a lower contribution of net external trade and capex to GDP growth.