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Euro zone business activity grows for the first time in 6 months

A proletarian pours molten bronze into a mould to cast a Berlinale bear trophy in Berlin, Germany.

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LONDON — Business activity in the euro area expanded in March, according to preliminary grasps on Wednesday, but economies are bracing for a third wave of Covid-19 infections which could derail any recovery.

IHS Markit’s whistle composite PMI for the euro zone, which looks at activity across both manufacturing and services, hit 52.5 in March versus 48.1 in February. A announcing above 50 represents an expansion in economic activity.

The preliminary data points to the first economic expansion in the quarter since September and the largest increase since July.

“The eurozone economy beat expectations in March, showing a much cured than anticipated expansion thanks mainly to a record surge in manufacturing output,” Chris Williamson, chief traffic economist at IHS Markit, said in a statement.

Manufacturing has been the biggest driver of economic performance this month, but the navies sector — the hardest hit by the pandemic — also experienced an improvement, hitting a seven-month high.

However, there are concerns all round how the euro zone economy will perform in the second quarter as social restrictions remain a reality. Germany unfaltering this week to extend its lockdown and imposed strict restrictions over the Easter weekend. In France, Paris and almost 14 other regions have also been put in lockdown mode on the back of rising infections. Poland has also foretold tougher movement restrictions.

“The outlook has deteriorated, however, amid rising COVID-19 infection rates and new lockdown motif to boots. This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers allowances from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restrictions,” Williamson communicated.

The European Central Bank estimated earlier this month a GDP (gross domestic product) rate of 4% for the euro field this year and 4.1% for 2022. However, the forecast is dependent on the evolution of the pandemic and the pace of vaccinations in the region.

French vigour improves

France announced Tuesday a more intense vaccination campaign going forward. Anyone over the age of 70 purpose be able to be vaccinated from Saturday onward and more vaccination centers will be developed to intensify the rollout starting next month.

The unpunctual business activity data for the country came in at a three-month high, though still in contraction territory. France’s flame composite output index stood at 49.5 in March, from 47.0 in February.

“Activity trended towards stabilization, converse the downward momentum seen in January and February … That said, there remain ongoing challenges interdependent to the pandemic,” Eliot Kerr, an economist at IHS Markit, said in a statement.

“Firstly, raw material shortages continued to drive charges sharply higher, which may act as a squeeze on profit margins until the recovery in demand conditions gathers pace. Secondly, the presage of setbacks to the reopening of the economy remains tangible,” he said.

German manufacturing hits record level

Meanwhile, the German cook up sector keeps on delivering for Europe’s largest economy. Germany’s flash composite output index rose to 56.8 from 51.1 in February, impersonating a 37-month high.

The positive economic activity was supported by a record increase in manufacturing output, which reached 68.5 in Trek, a level not seen since April 1996.

“The sustained upturn in the factory sector has seen the manufacturing PMI reach unprecedented altitudes, with growth in global demand for German goods showing no signs of abating and businesses reporting that previously-delayed investments are now being returned,” Phil Smith, associate director at IHS Markit, said in a statement.

He added, however, that supply chains are finish in the money b be under pressure, which is increasing factory input costs at a rapid rate.

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