Eurozone business activity rises amid ECB easing

Eurozone businesses ramped up activity this month as the European Central Bank started printing money to spur economic growth, while a slowdown among Chinese factories fuelled expectations of more monetary stimulus.

US manufacturing activity growth also edged up despite a stronger US dollar and the threat of an interest rate rise from the Federal Reserve later this year.

The eurozone Composite Flash Purchasing Managers’ Index (PMI) from data vendor Markit, based on surveys of thousands of companies and seen as a good growth indicator, jumped to a near- four-year high of 54.1 from February’s 53.3.

The surveys pointed to first-quarter eurozone economic growth of 0.3%, Markit said, matching the previous three months’ but shy of the 0.4% median forecast in a Reuters poll taken earlier this month.

The ECB began its quantitative easing programme to buy bonds worth more than a trillion euro in March.

“I wouldn’t want to give QE too much credence at this stage. The ECB has only been buying for a couple of weeks and QE takes a long time to have any impact — if at all,” said Peter Dixon at Commerzbank. “The outright QE itself has had zero impact; growth was already happening.”

A sub-index measuring eurozone prices rose to an eight-month high of 49.0 but it has spent three years below the break-even level of 50, suggesting inflation will not return any time soon.

Oil prices have tumbled over the past nine months and inflation rates across the world have followed suit.

European shares and the euro edged up after the surveys were published but the slowdown in China kept oil and commodities-linked assets under pressure.

China’s flash HSBC/Markit PMI dipped to an 11-month low of 49.2 in March, below the 50 level that separates growth from contraction.

“The deteriorating PMI confirmed that downside risks to China’s 2015 growth have started to materialise. We expect an accelerated monetary easing cycle and somewhat loosening of the fiscal stance,” said Jian Chang at Barclays.

Growth in the US manufacturing sector edged up to a five- month high in March, according to Markit.

The preliminary US Manufacturing Purchasing Managers’ Index rose to 55.3, its highest since October, when the final PMI was 55.9.

“Manufacturing regained further momentum from the slowdown seen at the turn of the year, with output, new orders and employment growth all accelerating in March,” said Chris Williamson, Markit’s chief economist.

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