Danske Research Team
Danske Bank A/S
Euro area PMIs declined in April after having trended higher since end-2014. The manufacturing PMI declined to 51.9 from 52.2 in March (consensus 52.6) and the services PMI declined to 53.7 from 54.2 in March (consensus 54.5).
The small declines in the PMIs suggest that GDP growth peaked in Q1, supported by the decline in the oil price, and better consumer and business confidence on the back of the ECB's QE programme.
The lower PMIs do not change our view that GDP will grow 1.6% this year, which is above consensus of 1.4%. GDP growth should still be reasonable in Q2, with the weaker quarterly growth due mainly to a peak in growth in private consumption in Q1, which is also suggested by the small decline in consumer confidence in April.
The German manufacturing PMI declined to 51.9 in April from 52.8 in March (consensus 53.0) while the services PMI fell to 54.4 from 55.4 (consensus 55.5). The weaker German PMIs are in line with the lower ZEW expectations, which have started to decline as the share of respondents who believed in either further improvements or worsening had reached stretched levels.
In Germany, service output prices increased for a third month in a row and are at their highest level since the beginning of 2014. This could be a sign of higher wage pressure which should support German core inflation.
The French manufacturing PMI declined to 48.4 in April from 48.8 (consensus 49.2) while the services PMI declined to 50.8 from 52.4. The French economy remains the weak link in the euro area recovery, in our view.
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