Euro zone economy races into Q2 with bumper growth -PMI


Reuters

UPDATE 1-Euro zone economy races into Q2 with bumper growth -PMI


* April flash composite PMI 56.7, six-year high
    * Services and factory PMIs above all Reuters poll forecasts
    * PMI points to Q2 GDP growth of 0.7 pct -Markit
    * Graphics: http://tmsnrt.rs/2bkCt7Q

    By Jonathan CableLONDON, April 21 (Reuters) - The euro zone economy bounded
into the second quarter with strong broad-based growth,
according to a survey showing businesses increased activity at
the fastest rate for six years as new orders stayed robust.
    Signs the bloc is on a sustainable growth path, along with
inflationary pressures, will be welcomed by the European Central
Bank, which has struggled for years to achieve either, despite
ultra-loose monetary policy. Consumer confidence is also
improving.
    IHS Markit's Flash Composite Purchasing Managers' Index,
seen as a good guide to growth, climbed to 56.7 from March's
56.4, its highest since April 2011. A reading above 50 indicates
growth.
    That matched the most optimistic forecaster in a Reuters
poll in which the median prediction was a dip to 56.3.
    "April's rise in the euro zone composite PMI adds to
evidence that the economy is performing well," said Jennifer
McKeown, chief European economist at Capital Economics.
    IHS Markit said the latest PMI data, if maintained, pointed
to second-quarter economic growth of 0.7 percent, well above the
0.4 percent predicted in a Reuters poll on Thursday. [ECILT/EU]
    "There is a good outlook for the year - it looks like the
upturn has legs. With numbers like these, people are going to
start edging up their forecasts," said Chris Williamson, chief
business economist at IHS Markit.
    Earlier data from Germany showed its private sector grew at
a slower pace this month as services shifted into a lower gear
but factory activity remained high, suggesting Europe's biggest
economy is carrying its upswing into the second quarter.
    French business activity confounded expectations in April by
growing at the fastest pace in nearly six years, showing no
signs of cooling down just days before the most uncertain
presidential election in years.
    Although no major survey sees her winning, far right and
anti-European Union leader Marine Le Pen is polling strongly.
None of the economists polled by Reuters this week said she
would be best for French economic growth. http://reut.rs/2pBAZQr
    "Even though on the eve of the first round of the French
elections a good portion of caution is recommendable, evidence
is piling up that the euro zone economy could become the
positive growth surprise of the year," said ING chief economist
Carsten Brzeski.

    HIGH HIRING
    Providing further evidence the recovery will continue, a
sub-index measuring new business in the euro zone only dipped to
55.8 from March's six-year high of 56.2.
    Firms in the bloc's dominant service industry increased
activity faster this month, with its PMI rising to 56.2 from
56.0, a six-year high. That was above all forecasts in a Reuters
poll, where the median predicted no change.
    To meet the growing demand, and indicating confidence about
the months ahead, hiring remained vigorous. The employment index
held steady at 54.4, its highest since November 2007.
    Factories also had a good start to the quarter - the
manufacturing PMI climbed to a six-year high of 56.8 from 56.2,
surpassing all estimates in a Reuters poll. An index measuring
output jumped to 58.0 from 57.5, the highest since April 2011.
    Future output, which gauges what factories think they will
produce, rose to 66.9 from 66.6. That matched the highest
reading of the sub-index, started in July 2012, set in January.


 (Editing by Catherine Evans)
 ((jonathan.cable@thomsonreuters.com; +44 20 7542 4688; Reuters
Messaging: jonathan.cable.thomsonreuters.com@reuters.net))

Keywords: EUROZONE ECONOMY/PMI (UPDATE 1)



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