Euro area private sector growth accelerates to a seven-month high

Recent data fuelled optimism for recovery amid Germany’s planned fiscal support, which may counter the impact of US tariffs. The HCOB composite output index rose to 50.9 from 50.2 in February, marking its fastest expansion since August last year, while staying in positive territory for the third consecutive month. The flash score for the index was 50.4.

Manufacturing showed signs of improvement, with output expanding for the first time in two years, while services activity gained momentum. The services Purchasing Managers’ Index (PMI) climbed to 51.0 in March from 50.6 in February, surpassing the flash reading of 50.4. Both the input and output prices indexes eased with the latter falling to 53.6 from 54.7.

Meanwhile, the US services sector slowed significantly in March, reaching a nine-month low. Data published on Thursday reinforced expectations that economic growth likely declined sharply in the first quarter amid uncertainty linked to import tariffs. The Institute for Supply Management (ISM) reported that its non-manufacturing purchasing managers’ index (PMI) fell to 50.8 last month, the lowest reading since June of last year, down from 53.5 in February. Economists had forecasted the services PMI to ease to 53. The ISM survey’s new orders measure also declined, dropping to 50.4 last month from February’s 52.2. Though output saw an increase, that was likely due to businesses rushing to conclude pending work before tariffs were implemented.

A gauge of backlog orders fell sharply, plunging to 47.4 from 51.7 in February. With growth stalling, the survey’s measure of prices paid for services dropped, though it remained high at 60.9, down from 62.6 recorded in February. Reduced demand for services could constrain businesses’ ability to raise prices.

Finally, the UK service sector in March expanded at a faster rate, driven by a renewed upturn in new orders, according to the S&P Global purchasing managers’ survey released on Thursday. The final services Purchasing Managers’ Index rose to 52.5 in March, up from 51.0 in February, though it remained below the flash reading of 53.2.

New business experienced its strongest growth in four months, supported by robust consumer spending despite persistent challenges, including tight household budgets, increased risk aversion among clients and ongoing geopolitical uncertainty. Export sales increased for the first time in four months, reaching their fastest pace since October 2024, as demand from Europe began to recover. Although new orders returned to positive territory, the backlog of work across the service economy declined slightly. Companies cut workforce numbers in March, citing a mix of redundancies and the non-replacement of departing employees. However, the overall rate of job shedding slowed significantly compared to February.

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).