Across countries, the French composite index surprised to the upside, at least partly reflecting payback from a very weak February print, while German PMIs surprised slightly to the downside despite a meaningful rise in manufacturing activity. In the UK, the headline index surprised meaningfully to the upside at 52.5 on the back of a sharp rise in services activity, although the details of the report were again weaker than the headline number would suggest.
The Euro area composite flash PMI improved to 50.4 in March (vs. 50.2 in February), a touch below consensus and close to our own expectations. The improvement was led by the manufacturing output index, which increased by 1.8pt to 50.7, the highest level in more than three years. The services activity index edged down slightly to 50.4 (vs. 50.6 in February). The composite employment index increased by 0.9pt to 50.1, the first above-50 reading since July 2024. Price-related components were also softer on net in March, moving back to the levels of late 2024. Indeed, the composite input prices index declined by 1.9pt to 56.7 and the composite output price index edged down by 0.7pt to 52.7. Within manufacturing subcomponents, new orders (+1.5pt to 49.2), backlogs (+0.7pt to 47.9), and future output expectations (+0.3pt to 56.5, GS sa) all improved. Within services subcomponents, new orders edged down, backlogs (-0.9pt to 46.4) reached the lowest level in more than 4 years, and expectations softened further.
France: The French composite flash PMI improved by 1.9pt to an above-consensus 47.0. The improvement was broad-based as both manufacturing output (+4.3pt to 48.8) and services activity (+1.3pt to 46.6) increased. Despite today’s improvement, the level of the French services PMI remains soft relative to other domestic services survey datapoints and services PMIs elsewhere in the region. The composite employment index increased by 1.5pt to 48.0 following 3 months of declines.
Germany: The German composite flash PMI improved by 0.5pt to 50.9, below consensus expectations but above our own forecast. The improvement reflected a sharp 3.2pt increase in the manufacturing output index to 52.1, the highest level in 3 years, which more than offset a 0.9pt decline in services activity to 50.2. The composite employment index increased by 1.0pt to 48.9, mostly reflecting an improvement in manufacturing. The release noted that “growth expectations increased in both monitored sectors and remained stronger in manufacturing than in services”, which suggests that the fiscal news in March likely boosted business sentiment boost. That said, the releases also noted that “the expansionary fiscal policy should start making waves in the second half of the year, boosting the service sector as infrastructure and defence projects drive up demand. Most of the real impact, though, will likely be felt in 2026.”
Periphery: The periphery composite PMI edged down by 0.8pt to 52.4, reflecting declines in output for both sectors. That said, the composite employment index continued to edge up and now stands at 52.5.
The UK composite flash PMI increased to 52.0 (vs. 50.5 in February), well above our consensus expectations for an essentially unchanged reading. The improvement was driven by a 2.2pt rise in services activity, which more than offset a 2.7pp decline in the manufacturing output index. The composite employment index increased by 3.9pt to a still-depressed 47.4. Composite new orders and backlogs also improved but remained at contractionary levels, and price-related components remained firm with output prices at 57.6 and input prices at 63.7. The release indicated that “the improvement is also being driven by only small pockets of growth, notably in financial services, with consumer-facing business and manufacturers continuing to struggle against headwinds both at home and abroad.”
The Euro area composite PMI for March printed slightly below expectations. We see this as consistent with our view that the fiscal news in the region is lifting investors and corporate business sentiment, especially in the manufacturing sector, but that the impulse to actual growth will take time to materialise.
As far as trade tensions are concerned, today’s data suggests there is only limited evidence of US frontloading ahead of possible new tariff announcements. Across countries, the French composite index surprised to the upside at least partly reflecting payback from a very weak February print and a general underperformance of PMIs relative to other domestic activity indicators, which seem to be consistent with flat to slightly positive growth in Q1.
German PMIs surprised to the downside despite a meaningful rise in manufacturing activity. Tomorrow’s release of the ifo survey for March will offer additional detail on pace of the German manufacturing recovery. Despite a slight deterioration in March, composite PMIs continue to point to ongoing growth outperformance of the periphery relative to Germany and France. In the UK, the headline index surprised meaningfully to the upside, reflecting a sharp rise in services activity. The details of the report were again weaker than the headline number would suggest with employment, new orders, and backlogs well below 50 and price pressures remaining very elevated.
