The flash reading of the IHS Markit composite purchasing managers’ index (PMI), seen as a proxy to economic health, bounced above the 50 mark separating growth from contraction, to 52.5 in March, compared to February’s 48.8, its highest reading since late 2018. A rise above 50.0 indicates the first increase in business activity since last September, with the current expansion the biggest on record since last July and second-steepest in the past 28 months, said IHS.
The flash eurozone manufacturing PMI output index jumped to 63 from 57.6 in February, as factories ramped up production. On the other hand, the services sector continued to be constrained by the COVID-19 pandemic, with the activity level inching up to 48 in March from 45.7.
Meanwhile, the US economy grew at an annual rate of 4.3 per cent in the final three months of 2020, slightly faster than previously estimated, as recovery expectations for 2021 rise along with vaccinations and the US unleashes nearly $2 trillion in government support.
Gross domestic product (GDP) in the October-December quarter rose from an estimate last month of a 4.1 per cent rate. The upward revision reflected stronger inventory restocking by businesses. For the whole year, GDP shrank by 3.5 per cent, the largest annual decline since a plunge of 11.6 per cent in 1946 when the US demobilised after World War II. The 3.5 per cent drop was unchanged from the previous report. Economists are expecting a huge rebound this year, helped by government support packages and low interest rates.
Finally, the UK Consumer Price Index (CPI) slipped in February compared to the previous month as rising petrol costs failed to offset discounted clothing and footwear.
UK CPI rose by 0.4 per cent in the 12 months to February, down from a 0.7 per cent rise in January. On a monthly basis, CPI rose by 0.1 per cent in February 2021, compared with a 0.4 per cent rise in February 2020, the Office for National Statistics said on Wednesday. Falling prices for clothing, second-hand cars, and games, toys and hobbies drove the inflation rate downwards.
The drag on consumer price inflation in February from the COVID-19 lockdown will delay the rebound in inflation to two per cent and perhaps prompt the markets to reconsider their view that interest rates will rise next year, said Paul Dales, an economist at Capital Economics.
This report was compiled by Bank of Valletta for general information purposes only.