Euro zone and U.S. economic activity increase; China decline retards

Surveys carried out on Wednesday indicated that private sector of euro zone commenced 2nd quarter on strongest base since 2011 and the manufacturing sector of U.S. grew this month. In China, pace of decline of factory activity retarded.

U.S. production increased

In the U.S. production activity increased, however the rate of growth delayed and was less than expected. In April, U.S. Manufacturing Purchasing Managers Index declined to 55.4 as compared to 55.5 in previous month and against expectation of 56.0 by analysts. The headline number is still more than neutral threshold of 50.

The data underlines hopes for a stronger 2nd quarter after massive snowstorms during the first quarter dampen U.S. economic activity. For April, HSBC/Markit flash PMI of China increased to 48.3 as compared to 48.0 in previous month, but was still under the 50 line which separates expansion from contraction.

Analysts notice preliminary indications of stabilization in Chinese economy as a result of the government's targeted actions to fortify growth, but think that additional policy support might be required because structural reforms add pressures on activity.

Euro zone surprises

Euro zone’s biggest economy, Germany once again led growth in the bloc, where the PMI surged from March. According to a survey, euro zone’s dominant services industry was the driving force whereas manufacturers also saw a stronger month as compared to the suggested median forecast.

But for policymakers, the cause of concern is to restrict inflation to their 2% target ceiling, service companies reduced prices for the 29th month in succession, and at a faster rate than in March when inflation dropped to just 0.5%. The strong data increased value of euro which was higher by 0.28% against dollar.

In spite of the fact that deflationary pressures deserve attention, today’s figure provides a sigh of relief to the ECB. As the recovery is expected to continue, there isn’t any urgent requirement for strong measure. In addition to Germany, other member countries also performed well, except France, where even though the index was more than 50 for the second consecutive month, it was less than the previous reading.