Flash PMI shows Euro zone service businesses thriving in March while factories experience difficulties.

A survey demonstrated that business activity in the euro zone accelerated unexpectedly this month due to increased spending on services by consumers, however, the manufacturing sector's downturn worsened as demand for manufactured goods weakened. This occurred in London and was reported by Reuters.

On Friday, new data revealed that S&P Global's flash Composite Purchasing Managers' Index (PMI), which is regarded as a reliable measure of economic well-being, rose to its highest level in ten months, reaching 54.1 in March, as compared to February's 52.0.

The number was significantly higher than the 50 mark, which marks the point between growth and decline. Additionally, it was higher than what was expected by many experts. A recent poll conducted by Reuters predicted that the number would drop to 51.9.

As spring arrives, there are new indications of growth in the economy of the euro zone. According to Chris Williamson, who is the main economics expert for S&P Global, there is data suggesting that GDP growth in the first three months of the year could be around 0.3%, with an even stronger rate of about 0.5% just in March.

In March, a survey conducted by Reuters projected that there would be a decrease of 0.1% in the gross domestic product (GDP) during this quarter.

There was a strong need for goods and services, with the demand reaching a level not seen in 10 months. Consequently, businesses were unable to finish all orders, marking the first time this happened since June. The index measuring the amount of work that still needs to be done increased from 49.5 to 50.1, indicating a slight improvement above the critical point where it balances out.

The PMI for the major services industry within the bloc surged to 55.6 in the current month, up from a previous reading of 52.7. This exceeded expectations from the Reuters poll of a decline to 52.5.

In order to handle the rise in work, companies hired more employees at the fastest rate since May of the previous year. The job index increased from 51.9 to 54.3.

In contrast, the situation was not as positive for manufacturing plants. The main index measuring manufacturing activity, also known as the manufacturing PMI, decreased from 48.5 in February to 47.1. This came as a surprise as many experts participating in a Reuters poll had predicted a rise to 49.0.

A gauge that indicates the level of production, and is a component of the combined PMI, has decreased below the neutral point to 49.9 compared to the previous month's figure of 50.1.

According to Williamson, the increase is not balanced at all as it heavily relies on the service industry. Whereas, the manufacturing sector is not making the same progress and is having difficulty maintaining production as a result of reducing demand.

Supply chain enhancements led to a decline in the cost of raw materials for the first time since June 2020, during the onset of the COVID pandemic. The index for input costs experienced a decrease from 50.9 to 46.4.

This move is sure to be received with open arms by those in charge at the European Central Bank. They decided to raise interest rates just last week, maintaining their campaign against inflation despite the recent financial upheaval in the banking industry.

Jonathan Cable reported the information in this article while Susan Fenton handled the editing.