Eurozone PMI remains in expansion territory

On the radar

• In Poland, real retail sales disappointed visibly in February declining by -0.5% y/y vs. expectations of growth at 3.4% y/y

• Today, Hungarian central bank holds a rate setting meeting and we expect stability of rates.

• At 10 AM CET Poland will release unemployment rate in February.

• At noon CET Serbia will publish real wage growth in January.

Economic developments

In Eurozone, the flash estimate of the PMI index rose slightly in March, with the value of the composite indicator increasing by 0.2 points, bringing March’s PMI index to 50.4 points. Moreover, the composite indicator remained in the expansion zone, albeit only very slightly, throughout the first quarter. This suggests moderate growth in the euro area economy at the start of the year. More importantly for the region, the situation in the industry is starting to improve. The manufacturing PMI index gained 1.1 points in Eurozone. Although the value at 48.7 points remains in the recession zone, the slump has eased considerably in recent months. Both Germany and France, the euro area's two largest economies, delivered positive surprises. The decline in industrial orders eased across the eurozone and Germany saw a slight increase for the first time since March 2022. While the uncertainty around tariffs remains high, recent announcements about triggering escape clause in the Eurozone and Germany passing the plan to invest EUR 500 billion into infrastructure and climate protection could lift the mood about future economic development.

Market movements

In Hungary, the upcoming central bank meeting will be the first under the new leadership. We do not see space for a rate cut at the April meeting or in the near future, as the inflation rate increased in February. More importantly, however, inflationary expectations are elevated, further limiting the space for monetary easing. Although the EURHUF moved visibly down over the last month, the Hungarian forint remains vulnerable, and its stabilization will be in focus. Finally, new inflation and growth projections will be published in Hungary that may shed more light on monetary policy directions, including our expectations for the interest rate level at the end of the year. In Poland, the central banker Duda said that July’s inflation and growth projection will be key for any decision about monetary easing. In her view, however, even then the interest rate cuts should be small and the central bank should remain cautious. Romania sold RON 2.11 billion of 2026 government bonds, well above the plan of RON 600 million. FX and bond market remain stable in the region.

Download The Full CEE Macro Daily