The services PMI also reached its highest level in six months, rising to 43.1 in April, up 1.7 points from the forecast figure and up 2.2 points from March’s level.
Due to improvements both the manufacturing and services PMIs together, the composite PMI jumped by a record 2.2 points to a six-month high of 40.5 in April, up from both the 38.9 print expected and the previous month’s 38.3 reading.
“These survey results confirm that confidence has bottomed out,” Calyon Credit Agricole economist Sandrine Boyadijian said. “In the manufacturing and services sectors, business sentiment has brightened.”
Furthermore, while the indexes remain well below the level that separates contraction from expansion, the improvements in the forward-looking components suggest an economic stabilization before next year, Boyadijian added.
“The forward-looking components of PMI, new orders and business expectations, support our main scenario of a stabilisation in growth in the second half of the year,” she said.
Despite the strong gain in the PMI figures, Markit senior economist Chris Williamson warned not to grow too optimistic.
“The ongoing severity of the situation should not be underestimated,” he said. “The latest numbers are still consistent with a double-digit annual rate of decline of manufacturing output and a quarterly rate of contraction of GDP of at least 0.5%.”
ING Wholesale Banking senior economist Martin van Vliet agreed, adding that the path to eventual economic recovery “will likely be bumpy”.
“In other words, this probably is more the end of the beginning rather than the beginning of the end of the recession,” van Vliet said.
The euro showed no reaction to the PMI figures. However, yields on both the German Schatz and the Bund rose on the news.
Over the span of 15 minutes following the upside surprise in the French PMI numbers, the yield on the German two-year bond rose from 1.435% to 1.474%, and jumped again from 1.463% to 1.484% one hour later.
A similar pattern was noted in Bund yields, which increased to 3.227% from 3.1966% on the back of better-than-expected French data, and rose again to 3.245% from 3.22% following the euro zone PMI jumps.
By Todd Wailoo, twailoo@economicnews.ca; edited by Nick Say, nsay@economicnews.ca
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