Commerzbank’s Senior Economist Dr. Vincent Stamer notes that the Euro area composite PMI fell from 51.9 to 50.5 in March, with services weakening and manufacturing flattered by longer delivery times. He links this to the war in Iran, which is hurting expectations and lifting input prices. Despite the March drop, PMI levels still historically align with moderate Euro area growth.
Services weaken as manufacturing distorted higher
“The composite Purchasing Managers’ Index (PMI) for the manufacturing and services sectors in the euro area fell from 51.9 to 50.5 points in March. The war in Iran appears to make itself felt: while expectations in the euro area are declining significantly, input prices are rising.”
“In particular, sentiment in the services sector has deteriorated (50.1 after 51.9), while the index for the manufacturing sector actually rose slightly from 50.8 to 51.4.”
“However, the figure for the manufacturing sector is likely to be skewed upward by longer delivery times from suppliers. In “normal” times, such longer delivery times are cyclical in nature. They signal high demand among suppliers, are thus a positive sign for the economy, and therefore contribute positively to the index.”
“Currently, however – similar to during the COVID-19 pandemic – the longer delivery times are likely caused by disruptions to supply chains resulting from the war in Iran. Delivery times are therefore more of a negative signal.”
“Consequently, today’s figures point to a somewhat weaker situation in the manufacturing sector – despite a slightly higher overall indicator.”
“This means the economic indicator has been trending downward since November, but remains within the range where the euro area economy has typically grown moderately in the past.”
“If the war in Iran does not end in the coming weeks or even escalates further, the economy is likely to suffer even greater damage.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/euro-area-war-impact-weighs-on-outlook-commerzbank-202603241155
