Euro area economy grows in April as companies adjust to virus, PMIs show

Euro area manufacturing and services activity surprised to the upside in April, growing at pace not seen since July, the results of two key surveys revealed.

Based on preliminary results, IHS Markit's composite output index for both sectors rose from a reading of 53.2 for March to 54.7 in April (consensus: 53.3).

The Purchasing Managers' Index for services meanwhile rose from 49.6 to 50.3 (consensus: 49.6).

It was the first reading above 50.0 points - which denotes growth - in the services PMI since August, thanks to broad gains across the single currency bloc.

In parallel, that for factory activity improved from 63.3 to 63.4 (consensus: 63.3) - its best level since June 1997.

Factory growth in Germany was said to still be leading the upturn, although output growth across the rest of the euro area was rebounding at a record pace.

IHS Markit also noted how new order growth in the euro area was at its highest since September 2018, while backlogs of work improved to their best level since January 2018.

For his part, Chris Williamson, IHS Markit's chief business economist, highlighted the strength in the euro area economy eve in the face of tighter lockdown measures, in part as services companies "adjust to life with the virus".

Williamson also described the factory sector as "booming", even as he cautioned that the "steep" increase in demand for raw materials was driving "unprecedented" supply chain delays and pushing companies' costs up at the quickest pace for a decade.