In March, both eurozone consumer price inflation and core price eased, thereby increasing the chance of an interest rate cut by the European Central Bank in June, and putting a stop to the rapid tightening cycle of the last few years.
Consumer price growth in the eurozone fell to 2.4 per cent in March from 2.6 per cent a month earlier, contrary to expectations for a steady rate as food, energy and industrial goods prices all contributed to the lower headline figure.
Meanwhile, core inflation fell to 2.9 per cent from 3.1 per cent, coming below expectations for 3.0 per cent, according to data released from Eurostat, the EU’s statistics agency. March’s drop in headline inflation “may raise expectations for a rate cut later this month”, however, the “stickiness of services prices will make the ECB wait for further evidence of easing wage growth before starting the easing cycle” in June, said Diego Iscaro, economist at S&P Global Market Intelligence.
Meanwhile, the Institute for Supply Management released a report on Monday that showed a modest growth in US manufacturing activity in March, after 16 consecutive months of contraction.
On the other hand, in contrast to analyst expectations of 48.4, the data indicated that the ISM Manufacturing Purchasing Managers’ Index climbed from 47.8 in February to 50.3 in March. A reading above 50 shows the economy is in expansionary territory. While the Production indicator increased from 48.4 to 54.6, the New Orders index climbed from 49.2 in February to 51.6 in March. Although the economy’s growth prospects improved by the manufacturing rebound, rising raw material costs indicate that goods inflation may accelerate in the coming months. The main reason behind last years’ inflation slowdown was goods deflation.
Finally, China’s service sector activity expanded in March, in line with expectations, a private poll showed on Wednesday, as Beijing’s ongoing efforts to shore up liquidity and boost local demand contributed to the growth. The Caixin service sector PMI increased from 52.5 in February to 52.7 in March. This was the 15th consecutive month that this score indicated an increase in services activity. Although the rate of expansion was higher, it was still less than the long-run series average.
The rate of new business expansion was at its quickest since December of last year, mostly due to improving underlying demand and efforts to boost new orders. That also boosted business confidence which rose for the first time in three months on hopes that new product lines, expansion plans and increases in client budgets will help enhance sales.
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