However, somewhat worrying for policymakers at the European Central Bank as they prepare to move away from an ultra-loose stance, inflationary pressures eased and the survey hinted at further easing in coming months.
IHS Markit’s Final Composite Purchasing Managers’ Index, seen as a good overall indicator of eurozone growth, fell to a 15-month low of 55.1 in April from March’s 55.2.
That was a touch below a flash estimate but still well above the 50 mark separating growth from contraction.
It was the lowest since January 2017.
Retailers had a disappointing March, official figures showed yesterday, with sales up a much slower-than-expected 0.1% as shoppers kept their hands in their pockets, adding to evidence the bloc’s economic upswing is fading.
A March Reuters poll said growth had already peaked but another poll last month said the ECB would still end its stimulus this year and hike interest rates in 2019.
“It’s continuing something we have seen – European growth has slowed markedly since the end of last year.
The encouraging thing is there are signs the numbers are starting to stabilise,” said James Nixon at Oxford Economics. IHS Markit said the survey was indicative of the eurozone economy growing around 0.5%-0.6% this quarter.
A Reuters poll last month pegged growth at 0.6%, faster than the official flash first quarter estimate of 0.4%.
But forward-looking indicators suggested more momentum may be lost.
While backlogs of work were again accrued, firms did so at a slower rate and this meant an index measuring optimism fell to a five-month low of 65.7 from 66.3.
Composite PMIs for Germany, Italy and Spain all fell from March readings while France’s held steady.
An earlier flash PMI covering the bloc’s dominant service industry suggested activity there picked up but the final reading showed a fall to 54.7 last month from March’s 54.9.
The preliminary estimate was 55.0. April’s slowdown came despite service firms raising prices at a shallower rate – the output price index fell to a seven-month low of 51.8 from 52.1.
Official flash data on Thursday showed April inflation unexpectedly slipped to an annual 1.2% in the bloc as prices of services increased at a slower pace.
The ECB wants inflation at just below 2%.
ECB policymakers have been debating whether to end the central bank’s €2.55tn ($3.1tn) asset purchase scheme but evidence of weakening inflation after a string of downbeat data could make it more difficult for them to curb stimulus.
“For the ECB to be confident and end quantitative easing this year and terminate the asset purchase programme we do need to see core inflation pick up,” Nixon said.
Growth in Germany’s services sector slowed to the lowest pace in 19 months in April, a survey showed yesterday, suggesting Europe’s largest economy had started the second quarter on a weaker footing.
Markit’s final services index fell to 53.0 from 53.9 in March, as clients placed fewer new orders. The index was substantially lower than a flash reading of 54.1, and below all forecasts in the Reuters poll.
This resulted in business confidence in the sector falling for a second month in a row from a seven-year high in February. Optimism towards the 12-month business outlook also fell to the lowest level since last November.
Phil Smith, economist at IHS Markit, said the slowing activity was no reason for alarm.
“It’s important to remember that the cooling seen since February comes on the back of the longest, and one of the strongest, periods of growth recorded in over two decades of data collection,” he said.
“Business conditions are still very healthy, and with firms still looking to boost capacity amid backlogs of work, the labour market is in good shape, too.”
The weaker expansion in services activity more than offset a slight pick-up in manufacturing output.
As a result, Markit’s final composite Purchasing Managers’ Index (PMI), which tracks the activity in manufacturing and services that together account for more than two-thirds of the economy, fell to a 19-month low reading of 54.6 from 55.1 in March.