Eurozone: PMIs rise on industrial optimism and frontloading - ABN AMRO

The eurozone composite PMI for March moved further into expansionary territory at 50.4 up from 50.2 in February. In the final month of Q1 eurozone private sector activity increased further on the back of rising optimism in the German manufacturing sector as higher fiscal spending brightens Germany's growth outlook. Consensus expected a slightly higher composite PMI, ABN AMRO's economists Jan-Paul van de Kerke and Bill Diviney report. 

US customers accelerate their eurozone industrial orders ahead of potential tariffs

"The PMIs have now remained in expansionary territory for the full first quarter consistent with our expectation of GDP expanding by 0.3% in Q1 on the back of strong domestic demand due to rising real incomes and frontloading effects stemming from expected US tariffs. Indeed, the improvement in the eurozone manufacturing sector, moving closer to neutral levels, pushed up the eurozone composite PMI, while the expansion in the services sector moderated." 

"The manufacturing sector stands to gain from higher growth prospects as rising defence spending and fiscal largesse in Germany raise future demand for industrial goods. Particularly in Germany, weak domestic demand has been one factor contributing to the industrial malaise. In addition to the anticipated rise in future demand, temporary factors have driven up current output. With the output component entering expansionary territory for the first time since March 2023, the eurozone industrial sector may also be benefiting from US customers accelerating their eurozone industrial orders ahead of potential tariffs."

"Zooming out, the PMI improving and moving further into expansionary territory is consistent with our GDP forecast for Q1. We have penciled in a 0.3% q/q rise in GDP in Q1 of 2025 after a rise of 0.2% q/q in the final quarter of 2024. High wage growth and easing inflation should further consumption, while exports stand to benefit temporarily from the aforementioned frontloading effects."