Eurozone PMI goes down ahead of ECB meeting

Markit’s Composite PMI fell to 53.1 from 53.3 in February as eurozone’s private firms kept slashing prices to raise demand, adding to mounting deflation fears.

The Markit’s survey, which is based on this morning’s service sector data and manufacturing reports early this week, reported that, although the headline output index was lower than February, it remained consistent with a 0.5% increase in GDP for the first quarter as a whole, improving on the 0.3% registered in the final quarter of 2013.

While the recovery from the bloc’s deepest economic downturn has been led by Germany, a more in depth regional breakdown showed that Ireland and France’s private sectors posted their best monthly growth in years.

Conversley in March, both Germany and Italy experienced slight downturns, while Spain saw positive returns.

Here’s Markit’s national ranking:

Ireland- 59.0 – 85-month high

Germany- 54.3- 5-month low

Spain- 54.2- 2-month high

France- 51.8- 31-month high

Italy- 51.1- 3-month low

Meanwhile, the ECB is expected to present the results of its monthly meeting and, despite the spectrum of deflation is still looming, most economists do not expect president Draghi to announce significant measures.

Willem Buiter, Citigroup’s chief economist, reportedly said that the ECB won’t take action, but  Draghi may express concern over the strength of the euro.

Michael Hewson of CMC Markets also said that little action is expected today:

“The consensus still remains for rates to remain on hold, but it is slowly shifting to some form of action with some predicting a cut of 0.15% in the headline rate and a negative deposit rate. This still seems unlikely at this stage, and even if implemented would have little lasting effect after the surprise factor had been digested.

“On the subject of a negative deposit rate, the implementation of such a measure could well do far more harm than good, particularly with so many European banks already struggling for profitability and looking to build up their balance sheets in preparation for the upcoming “Asset Quality Review” so that they can pass the ECB mandated stress tests due later this year.”



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