US private-sector growth eases as euro zone PMI strengthens

France's elections pose the highest near-term risk to the euro zone economy, which grew at its fastest pace in six years this month.
France's elections pose the highest near-term risk to the euro zone economy, which grew at its fastest pace in six years this month.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON/BRUSSELS • Privatesector growth in the United States eased to a seven-month low, while euro zone economy grew at its fastest pace in six years this month, according to flash estimates by a private survey released yesterday.

The data by IHS Markit showed that moderation in US private sector growth was due to the loss of momentum in both the services and manufacturing sector for this month, with the Composite Purchasing Managers' Index reading at 52.7, down from 53 last month. It was the weakest rate of expansion since last September, the report said.

Manufacturing PMI was at 52.8 (down from 53.3 last month) while services data was 52.5, down from 52.8 in the previous month.

The PMI measures companies' willingness to invest in their business and so, gives a good idea of how well the underlying economy is performing. Any reading above the 50-point line indicates expansion.

"The PMI data suggests the US economy lost further momentum at the start of the second quarter," said IHS Markit chief economist Chris Williamson. "The surveys are signalling a GDP growth rate of 1.1 per cent (in the second quarter) after 1.7 per cent in the first."

Labour market also continued to soften as subdued demand growth and lower volumes of incomplete work acted as a brake on staff hiring, the survey showed.

Meanwhile, data in Europe was strong. This month's composite PMI came in at 56.7 points, the highest reading since April 2011 and up from 56.4 points last month.

"Job creation... rose to the highest for almost a decade as firms boosted operating capacity in line with buoyant demand and widespread optimism about future prospects," it said in a statement.

Inflation, which has for years stayed well short of the European Central Bank's near 2 per cent target, picked up recently, reflecting an increase in underlying demand.

Broken down, the figures showed the services sector rose to 56.2 points this month from 56 points last month. The manufacturing output PMI, meanwhile, jumped to 58 points from 57.5.

Mr Williamson said the report suggested the euro zone economy would grow by 0.7 per cent in the second quarter, compared with 0.6 per cent in the previous one.

On the downside, "France's elections pose the highest near-term risk", he noted.

France and top EU economy Germany "are enjoying their best growth spells for six years, while elsewhere in the region, the pace of expansion has accelerated to a near 10-year high", he added.


A version of this article appeared in the print edition of The Straits Times on April 22, 2017, with the headline 'US private-sector growth eases as euro zone PMI strengthens'. Print Edition | Subscribe