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Eurozone business activity grows at slowest rate since January 2017

Eurozone business activity expanded at its slowest rate in more than a year in March as output growth moderated in both the manufacturing and service sectors, flash Purchasing Managers' Index data from IHS Markit showed.

The headline composite output index fell to 55.3, from 57.1 in February and the 12-year high level of 58.8 in January. The March reading was the lowest since January 2017 and signaled a second consecutive monthly easing in the rate of growth.

The services PMI activity index stood at 55.0, down from 56.2 in February, the lowest rate of growth in five months. Factory output rose at the weakest pace since January of last year. Meanwhile, manufacturing PMI dipped to 56.6 from 58.6 last month. New order inflows declined for both the services and manufacturing industries, with goods export orders recording the smallest increase since November 2016. Measured overall, new order inflows registered the smallest monthly gain seen over the past 14 months.

"While the first quarter average PMI reading remains relatively robust, indicative of GDP rising by 0.7-0.8%, the loss of momentum since the buoyant start to the year has been quite dramatic," IHS Markit Chief Business Economist Chris Williamson said.

"The fact that export order book growth has more than halved since the end of last year suggests the stronger euro is taking an increasing toll on export performance. Survey responses also highlighted how political uncertainty also appears to have intensified, dampening demand."

Jobs growth declined to a six-month low in March, but still indicated one of the largest monthly increases seen over the past 17 years. Backlogs of work increased more quickly than in February. Supply chain delays continued to hamper manufacturing delivery times.

While price increases eased for a second consecutive month, both costs and selling prices continued to rise at some of the fastest rates seen over the past seven years.

Business optimism fell to a four-month low but expectations of future output growth remained elevated, IHS Markit said.

French private sector growth eased in March but remains at an elevated rate, underpinned by a 21st consecutive monthly rise in new orders which consequently led companies to hire more staff. The flash composite output index dipped to a seven-month low of 56.2 in March from 57.3 in the previous month.

In Germany, business activity in the services sector grew at the weakest rate in eight months in March. The flash composite output index was at 55.4, down from 57.6 in February. The manufacturing industry expanded at its weakest pace in 14 months. Still, companies continued to hire amid signs of ongoing capacity constraints, with firms expressing optimism towards growth prospects in the year ahead.