The final figure of March euro zone services PMI showed an upward revision to 57.2, compared to the initial estimate of 56.9 and 56.8 in February. Euro zone services PMI is now at the highest level since August 2007, led by strength in core countries as France and Germany. The details show however that inflation might weaken sentiment in the coming months as the differential between input costs and prices charged rose to the widest since September 2008, suggesting that service providers have difficulties to pass through higher costs. The initial German reading was confirmed at 60.1, while French manufacturing PMI was slightly downwardly revised (60.4 from 60.7). While services sentiment also improved in Italy (53.3 from 53.1), sentiment remained weak in Ireland (51.1 from 55.1) and even fell back into contraction in Spain (48.7 from 50.8).
In February, euro zone retail sales unexpectedly dropped after a slight increase in January. On a monthly basis, retail sales dropped by 0.1% M/M, while the consensus was looking for a 0.1% M/M increase. The details show that sales of food, drink and tobacco stabilized in February, while sales of non-food products fell by 0.1% M/M. The country breakdown indicates that weakness was broad-based as sales fell in Belgium, Germany, France, Spain and Ireland, while they rose in Portugal. Euro area retail sales have risen only once in the previous seven months and are up a meagre 0.1% compared to last year, which indicates that consumers remain reluctant to spend.