- Prior 51.9
- Composite PMI 50.7 vs 50.5 prelim
- Prior 51.9
The headline estimate is a 10-month low while the composite reading is a 9-month low. All of this now points to the notion that the euro area economic recovery from last year is taking an abrupt knock. That as new orders/business fall hard amid elevated uncertainty from the Middle East conflict.
Besides that, the surge in input price inflation was the most notable thing in the report. Input prices jumped to a 34-month high in March. That led to the strongest overall increase in goods and services prices across the region since February 2024.
HCOB notes that:
"March’s PMI indicates that the eurozone economy has already been hit hard by the war in the Middle East. The encouraging signs of growth seen earlier in the year have been eradicated thanks to surging energy prices, choked supply chains, financial market volatility and a renewed downturn in demand. The accompanying surge in prices raises the unwelcome spectre of stagflation, or worse, in the near-term. "The near-stalling of growth in March drags the PMI’s signal for first quarter GDP growth down to 0.2%. More worrying is that there are clear risks of the economy contracting in the second quarter unless there is a swift resolution to the conflict, and even then we will likely see damaging energy market repercussions extending into the coming months.
"New orders inflows have fallen in March for the first time since last July, though the squeeze on spending from the rising cost of living is likely only just beginning. Widespread reports of supply bottlenecks arising from the war raise the risk of growth being constrained further and pressure on prices intensifying.
"Higher prices have also raised the prospect of interest rate hikes, with the European Central Bank taking a hawkish tilt to prevent these near-term inflationary pressures from becoming engrained.
"Hence business optimism about the outlook has slumped, which has already hit hiring but will also dampen business investment. "In this environment, it is likely that we will see increasing numbers of economic forecasters also revise their growth expectations lower for 2026 and maybe even pencil in a contraction of GDP in the coming quarter."
