The eurozone composite PMI for March rose to 50.4 from 50.2 in February, indicating continuous expansion. The increase in private sector activity is largely attributed to optimism within the German manufacturing sector, buoyed by higher fiscal spending.
The manufacturing sector is expected to benefit from growing demand driven by increased defence spending and improving economic forecasts. The recent surge in eurozone industrial orders by US customers is linked to anticipated tariffs, adding momentum to the industrial output.
Projected Gdp Growth
Overall, the PMI reflects a projected GDP growth of 0.3% for Q1 2025, following a 0.2% rise in Q4 2024. Expectations of high wage growth and easing inflation are anticipated to sustain domestic consumption.
The latest PMI reading confirms a steady, if modest, recovery in the eurozone economy. A figure above 50 signals expansion, and given that March’s data edged slightly higher than February’s, we see a positive trend, albeit a cautious one. It is clear that sentiment in German manufacturing is playing a dominant role, with government spending supporting demand.
Manufacturing appears to be gaining traction, largely thanks to expectations of increased fiscal expenditure, particularly in defence. The added boost from US industrial orders, seemingly accelerated by tariff concerns, provides another layer of support. If this demand persists, output in the sector should continue improving over the next quarter. Whether this translates into sustained momentum depends on how businesses navigate shifting trade policies.
With GDP growth projected at 0.3% in Q1 2025, a gradual economic recovery looks likely. This follows a 0.2% rise in the previous quarter, reinforcing the idea that the worst of the downturn is behind us. Wage growth remains strong, and inflationary pressures appear to be easing, which in turn should keep consumer demand intact. Provided households remain confident, domestic spending could serve as a stabilising force, helping to balance out external risks.
Market Considerations
For traders in derivatives markets, these trends are not to be overlooked. Industrial data and fiscal policies will shape sector-specific opportunities, particularly in manufacturing-linked contracts. The role of US demand in driving European orders adds another dimension—if tariffs continue to influence corporate decisions, we may see further distortions in overseas purchasing patterns.
Bond and interest rate markets also warrant attention. With inflation seemingly on a downward path but wage pressures still present, central banks will need to weigh their options carefully. Rate expectations have been fluctuating, and any fresh signals from policymakers could shift market positioning rapidly.
In the coming weeks, attention should stay on industrial output reports, consumer spending data, and central bank comments. Each of these elements will contribute to shaping the outlook, with traders needing to stay alert to unexpected shifts in sentiment or policy direction.
