Euro-Area Order Growth Signals Some Hope

(Bloomberg) -- Economic activity in the euro area showed signs of stabilization in April, with nascent signs that the bloc’s slowdown may be gradually bottoming out.

A composite Purchasing Managers’ Index came in at 51.5 in April, little changed from March’s 51.6, and a gauge for the service sector declined. Both readings were slightly higher than initial estimates, and order growth improved at the best rate since November. A separate report showed investor confidence in the euro economy rose this month to its highest since November.

Euro-Area Order Growth Signals Some Hope

Manufacturing remains the weak spot in the economy, with a reading below the key 50 level for the past three months as trade tensions take a toll on German factories. But continued growth in services suggest that global weakness hasn’t spilled over into domestic demand. That’s what some European Central Bank policy makers are counting on as they look for a better second half of 2019.

Economic numbers have been mixed in recent weeks, sparking some hope that the bloc may finally be starting to overcome the weak patch that was at risk of becoming entrenched. First quarter GDP growth was stronger than expected, and inflation accelerated more than forecast last month.

Still, output is currently outpacing growth in new orders, as businesses struggle to generate sustainable demand, according to IHS Markit’s report.

“The modest current growth of business activity is only being sustained by firms eating into orders placed in prior months,” said Chris Williamson, chief business economist. “Demand clearly needs to improve further to generate faster economic growth and give firms greater pricing power.”

Even though oil prices rose in April -- leading to higher input costs for many companies -- Williamson noted that few were passing them on. Average selling prices rose at the weakest pace since August 2017.

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