What Does PMI Survey Tell You About Inflation?

The purchasing managers’ surveys (PMI) are forward-looking indicators are therefore they are very helpful in indicating the short-term trends in the development of the economy and its segments. With manufacturing PMI out for the Eurozone in March, there is an important trend for policymakers to keep an eye on. The price pressures are to arise in the Eurozone.

The survey from IHS/Markit says that the input price inflation remained marked in March, despite easing to a six-month low. Higher costs are partially driven by supply-chain constraints as the Eurozone economy progresses full speed ahead with the average selling prices rising at a solid pace as companies passed on the rise in purchasing costs.

The manufacturing activity in the Eurozone slowed down from the multi-year peak at the turn of this year, but still remain robust and the Eurozone growth prospects remain firmly anchored on the upside.

With PMI reading well above 50-mark, the economic growth remains robust by historical standards, with all the major Eurozone countries rising strongly, indicating broad-based expansion. And this includes Greece. Manufacturing activity is therefore seen positively contributing to GDP growth in the first quarter.

Strong growth prospects are also supporting the outlook for inflation and the appearance of inflationary pressures will be welcomed by policymakers at the European Central Bank.