March Flash PMI: Germany leads the upside surprise

PMI

 At the composite level, new orders stood at the highest since May 2011 (+1.5 points to 54.0), hiring intentions posted the strongest print in four years (51.8) and deflationary pressure eased as some firms passed on higher costs resulting from the euro’s depreciation to clients (input and output prices are both at an eight-month high). 

·      Looking at the details, all the manufacturing sector components were in the green, especially new orders (+1.3 points to 52.2), a positive signal for manufacturing activity in the months ahead. Likewise, the backlog of works accumulated signaled some pressure on operating capacity (+1.1 to 50.8, an eight-month peak). Positive news came also from the services sector, with confidence rising for the fourth month in a row. Buoyant new business suggests that the momentum should be sustained in the coming months. Overall, our Q1 PMI-based GDP indicator increased to 0.4% q/q (+0.1pp) in March, slightly below our growth forecast (+0.5% q/q).

·      German composite PMIs surprised to the upside, as the manufacturing sector fared much better than expected, while services confidence came in also on the strong side. Conversely, French PMI disappointed as manufacturing failed to rebound and the services sector consolidated after last month’s jump. Elsewhere, we expect a similar improvement in both sectors by around +0.8 points in average for Italy, Spain and Ireland.

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