Eurozone economy returns to growth as Germany revs up

BRUSSELS — The eurozone economy returned to growth for the first time in six months in March, a closely watched survey said on Wednesday, as coronavirus lockdowns had little effect on manufacturing, especially in Germany.

"The eurozone economy beat expectations in March, showing a much better than anticipated expansion thanks mainly to a record surge in manufacturing output," IHS Markit Chief economist Chris Williamson said.

The firm's PMI index rose to 52.5 points in March from 48.8 points in February, breaking through the 50-point level which indicates growth.

IHS Markit's survey showed that a major pickup in activity in Germany, the eurozone's biggest economy, had lifted manufacturing output in the single currency bloc to 63 points, its highest reading since 1997.

The services sector, however, still lingered in recessionary territory under the effects of the pandemic, but the rate of decline was weakening, IHS Markit said.

The acceleration in manufacturing also affected hiring as manufacturers saw headcounts rise at a rate not seen since August 2018.

The services sector, which includes the hard hit tourism and hospitality sectors, only saw a far more modest rate of job creation, the survey said.

The doldrums felt in the services sector were expected to continue, with the pandemic still bringing extreme difficulties to consumer-facing businesses.

"This two-speed nature of the economy will therefore likely persist for some time to come," Williamson said.

IHS Markit also warned that the surge in demand for goods was "stretching supply chains to an unprecedented extent" which could trigger some consumer price inflation in the coming months.