European data: Record growth acceleration impact in the manufacturing sector

Markit has published preliminary forecasts for March PMIs today. While the services sector in the EU seems to remain in a contraction zone (country by country Germany has moved into growth zone), manufacturing production continues to gain momentum in expansion levels.

Markit has published preliminary forecasts for March PMIs today. While the services sector in the EU seems to remain in a contraction zone (country by country Germany has moved into growth zone), manufacturing production continues to gain momentum in expansion levels. The service sector performed better than expected, although generally feeling the effects of shutdowns. The optimism that global economies' expectation of recovery added to the demand component enabled the manufacturing sector to accelerate.

 

While manufacturing PMI in Germany showed a record acceleration to the level of 66.6, it seems that the growth position in the service sector with 50.8 in March. The service sector contraction in France has improved a little, the index is still at 47.8, but there is a recovery from the February index value of 45.6. As the quarantine measures become lighter, the bottom return effect will increase. In the general data of the Euro Zone, while there was a recovery in the service sector to 48.8 (February index value 45.7), the manufacturing sector expanded to the level of 62.4 with the optimism of global economic activity.

 

Global economic activity optimism is largely due to the impact of vaccination and financial incentives. In this context, there is an inflationary pressure created by the effect of commodity prices, especially from demand optimism. Expectations that inflation will accelerate in developed countries in the near term arise from both existing factors and the expectation that demand will contribute more to the economy. On the other hand, commodity prices indicate that the production costs in the sector are also under increasing pressure.

 

By the way; Speaking of economic activity, it is said that Germany's 5-day Easter closing plan will be withdrawn due to criticism from Merkel from within the party. The shutdown was negative for the economy. Normally; Germany, France and Italy, the main country economies, have recently expanded and re-imposed restrictions due to the wave of COVID-19 infections, hospitalizations and deaths. Considering that Biden will add a USD 3 billion infrastructure and support package to his 1.9 trillion USD financial package, the EU is also lagging behind in terms of fiscal policy reaction. The monetary policy has made its first visible action and the asset purchases, which will temporarily accelerate, have been increased to 21.1 billion EUR by the ECB.

 

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