Euro area flash PMIs remained strong in April, suggests GDP growth of 0.6 pct in Q2 – Nordea Bank

The flash PMIs for the euro area remained at a robust level in April, suggesting a GDP growth rate of about 0.6 percent in the second quarter of this year, according to Nordea Bank in a research report. The level of composite PMI for the currency bloc rose slightly to 56.7 in April from March. Services as well as manufacturing in the euro area appear to be enjoying favourable growth prospects. Opinions regarding new orders and employment continued to be optimistic.

PMIs in Germany stayed at a higher level even if the service sector PMI fell slightly to 54.7 from 55.6 and resulted in a slight drop in the composite index. The Presidential elections in France have not subdued the growth outlook in the private sector as the composite PMI rose to the highest level since 2011. In both France and Germany, prospects for growth in services and manufacturing were good and suggest that employment will be rising in both the nations.

Even if country-level data for other euro area nations is published later, the robust aggregate figures imply that the PMIs have been optimistic and even rebounded from the earlier months in a few smaller nations, stated Nordea Bank.

In the future, it would be interesting to see if the hard data follows the robust PMI figures. Until now, observations on a monthly basis on retail sales and industrial production have not indicated such an acceleration as PMIs might have indicated.

With the upcoming ECB meeting next week, an important question arises whether growth finally starts feeding into higher core inflation. The PMIs continued to indicate upward trend in price pressures. Particularly in Germany, the upward pressures in service sector prices show that core inflation might begin accelerating in months ahead from the very low levels seen at present. This underpins the view that the European Central Bank starts very gradually exiting from its extremely loose monetary policy stance later in 2017, added Nordea Bank.