LONDON (AFX) - Euro zone economic data this week are expected to show significant progress with the manufacturing sector finally turning around to lay the base for a full-fledged recovery in the second half of the year, according to economists.
At the same time, inflationary pressures are seen remaining benign. Taken together, the European Central Bank is unlikely to change interest rates when it meets next Thursday, they added. The holiday-shortened week is likely to get off to a good start as the Euro zone March manufacturing Purchasing Managers Index rises above the 50 barrier for the first time since April 2001.
"The figure is likely to show another improvement - showing a quick turn around at least in the industrial sector," Bank of America economist, Lorenzo Codogno said.
The recovery in the euro area PMI indicator will mean positive growth after four quarters of falling manufacturing activity. Going by the strong increase in the German Ifo and OECD leading indicators, a rise of about 2 points in the euro zone PMI will not be surprising, economists said.
The consensus is for a rise to 50.5 in March from 48.6 in February.
Later in the week, Euro zone industrial output numbers are expected to add to the cheer.
"The German industrial output figures were reassuring. We can expect a modest rebound in the Euro zone numbers," Codogno said. The overall implication may well be that the sector troughed in the last quarter of 2002, economists at Salomon Smith Barney said. Further progress is also seen in the services sector. "We expect another uptick in the euro area services PMI amid improving general economic conditions, as well as the progressive healing of the September 11 shock should continue to favour the services sector, including tourism, transportation and financial activities," CSFB economists wrote.
Reflecting improvements elsewhere, business and consumer confidence data throughout Europe are likely to show increased optimism, economist said.
While euro area inflation levels continue to be benign, there is a small risk of an increase given the change in the methodology for the Italian and Spanish components, Codogno at Bank of America said.
Economists' forecasts for euro zone indicators due for release April 2-5:
AFX CONSENSUS PREVIOUS

TUESDAY, APRIL 2

Euro zone March manufacturing PMI 50.5 48.6
German March manufacturing PMI 49.6 47.3

Euro zone March CPI estimate
(preliminary)
month-on-month +0.4 +0.2
year-on-year +2.4 +2.5

French March consumer confidence -14.0 -15.0

WEDNESDAY, APRIL 3
EU Commission
economic sentiment indicator (index) 99.5 99.2
Euro zone March industrial confidence -11.0 -14.0
(percentage balance)
Euro zone March consumer confidence -10.0 -9.0
(percentage balance)

Euro zone Feb unemployment (pct) +8.5 +8.4

Euro zone Feb PPI
month-on-month (pct) +0.2 +0.2
year-on year (pct) -1.0 -0.9

THURSDAY, APRIL 4
Euro zone March services PMI 52.0 51.5

FRIDAY, APRIL 5
German Feb manufacturing orders
month-on-month (pct) +2.5 -1.0
year-on-year (pct) -2.4 -4.1

ALSO EXPECTED

Euro zone Jan industrial production
month-on-month (pct) +0.3 +0.8
year-on-year (pct) -2.3 -4.1