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Eurozone Private Sector Returns To Growth In March

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The euro area private sector returned to growth in March underpinned by a record expansion in manufacturing as global demand continued to revive from the pandemic, survey results from IHS Markit showed on Wednesday.

The composite output index rose to an eight-month high of 52.5 in March from 48.8 in February. The reading was forecast to climb to 49.1.

The score exceeded the neutral level of 50.0 for the first time since last September, suggesting expansion in the private sector.

Divergent trends were seen by sector. Manufacturing output growth improved sharply to a record high, while the service sector was again hit by virus-related restrictions.

The manufacturing Purchasing Managers' Index reached a record 62.4 from 57.9 in the prior month. The score was well above forecast of 57.7.

Although the services PMI advanced to a seven-month high of 48.8 from 45.7 in February, the reading was below the neutral 50.0. The expected reading was 46.0.

"The outlook has deteriorated, however, amid rising COVID-19 infection rates and new lockdown measures," Chris Williamson, chief business economist at IHS Markit said.

"This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers benefit from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restrictions," Williamson added.

The survey indicated that the first quarter GDP could be better than expected, Bert Colijn, an ING economist said. With lockdowns being extended into the second quarter though, the economist expects the rapid economic rebound to take off later.

According to flash survey, the manufacturing upturn in the currency bloc was led by a record surge of factory production in Germany. Germany also outshone in terms of service sector performance.

Germany's private sector growth accelerated to a 37-month high in March. The flash composite output index rose to 56.8 from 51.1 in February. The reading was well above economists' forecast of 51.6.

The result was driven by improved performances across both manufacturing and services.

The services PMI came in at 50.8 versus 45.7 in the prior month. The expected reading was 46.2.

The manufacturing PMI advanced to 66.6 from 60.7 in the previous month and well above forecast of 60.8. The latest score was the highest since April 1996.

Meanwhile, France's private sector continued to contract in March with the decline predominantly driven by service providers. Nonetheless, the pace of decline slowed markedly from the previous month.

The composite output index increased to 49.5 from 47.0 in February. The score was forecast to rise moderately to 47.2.

The services PMI came in at 47.8 versus 45.6 in the prior month and the forecast of 45.5.

The manufacturing PMI climbed to a 39-month high of 58.8 in March, up from 56.1 a month ago and above economists' forecast of 56.5.

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