Capital Economics: European business activity expected to stagnate as input prices rise.

Jack Allen-Reynolds of Capital Economics stated in a report that business activity in the eurozone is expected to stagnate rather than shrink. The Purchasing Managers' Index survey showed that the rise in energy prices in March hurt demand and increased input costs. The composite index fell from 51.9 in February to 50.5 that month. Allen-Reynolds said that this drop was mainly driven by the services sector, while manufacturing output remained almost unchanged. However, the situation may still worsen. He said, "Potential supply chain disruptions have prompted some companies to make early purchases... This boost effect will not last forever." Meanwhile, output expectations fell to a 10-month low. "We speculate that the economy will stagnate rather than shrink, but there are clearly risks in both directions."