The sentiment deterioration among purchasing managers, which began at the beginning of 2018, continued in March according to preliminary results. The sentiment indices have now fallen for the third time in a row although they are still at a comparatively high level. There are therefore still no signs of an approaching end to the economic upswing. In fact we view the ongoing correction as a normalization of the previously almost euphorically overstated mood. The levels now reported are more in line with the actual growth rates achieved in the currency area. In addition, increasing capacity constraints and the trade conflict with the USA are likely to weigh on sentiment.
The composite index for the euro zone fell from 57.8 to 55.3 index points, the lowest level in 14 months. However, the loss recorded by the sentiment index for the services sector was less pronounced than that of the industrial sector.
Overall, the sentiment correction fits in with our forecast. Following the strong economic growth of +2.3 percent last year, it will prove difficult to shift into a higher gear. We confirm our growth forecast of 2.3 percent for 2018.
German purchasing managers remained upbeat in March, despite the decline in the sentiment indices for industry and the services sector. The composite index lost 2.2 points compared with the previous month and currently stands at 55.4 index points. This is the lowest level in eight months. Overall, the assessment of the economic situation is still more than robust. Production and new orders posted gains, but the growth rates were weaker than in previous months. The employment prospects remained positive against the backdrop of the current capacity constraints, but here the assessment also weakened up somewhat compared with the long-term high of January.
Based on the survey results among purchasing managers, the French private sector remained in robust shape, despite somewhat more pessimistic values. Here, too, the composite index went into decline, reaching 56.2 points in March compared with 57.3 index points in the previous month. But the high level signals hope that the economy will continue growing in the coming months, with the order backlog of French companies registering a further gain in March. While sentiment in the services sector in France also fell slightly on a monthly basis, the index for industry recorded a sharper decline. Nevertheless, both sentiment indices remain above the growth threshold of 50 index points as well as above the long-term average.