The March flash PMI survey suggests that the economy ended the current quarter on a very upbeat note. In fact, at 57.6, up from February's final 55.9, the key composite output index was at its highest level in nearly six years.
The improvement was dominated by the service sector where the flash PMI easily exceeded expectations with a 2.1 point spurt to 58.5, its best reading in some seventy months. Manufacturing struggled to keep up although at 53.4, its provisional PMI was 1.2 points firmer than its final mid-quarter mark and also well above the market consensus.
Somewhat disappointingly given the buoyancy recorded elsewhere, manufacturing output (53.7) expanded at a slightly slower pace than last time. However, with orders in both sectors increasingly strongly, the outlook was still optimistic. Moreover, with backlogs performing in much the same manner, signs of rising capacity pressures were apparent in manufacturing and services alike. Against this backdrop, private sector aggregate employment continued to rise, albeit primarily in services where the increase was the largest since August 2011. Rounding things off, business confidence in the year ahead recorded its strongest level in nearly five years.
Meantime, both inflation indicators were positive. Hence, overall input cost inflation was only fractionally short of February's 68-month peak and, more significantly, selling prices saw their first increase since April 2012, driven by a small gain in the manufacturing sector.
The flash March results are surprisingly positive and suggest that first quarter economic growth should be at or around the 0.4 percent quarterly rate registered at the end of last year. They also make for some upside risk to the full Eurozone report, due shortly.