Eurozone growth accelerates to nine-month high in February
Eurozone business activity growth accelerated to a nine month high in February, reflecting an improved performance of the service sector and a return to growth of manufacturing output.
Rising demand, healing supply chains, order book backlog reduction and improved confidence underpinned the upturn. The data are consistent with the economy expanding in the first quarter so far, with employment also continuing to rise.
Input cost inflation meanwhile cooled further, notably in the manufacturing sector. While rates of selling price inflation remained stubbornly high, especially in the service sector, in part linked to the impact of higher wage costs, the overall rate of selling price inflation also slowed, down to a 16-month low, in a further sign of moderating price pressures.
The seasonally adjusted Composite Output Index, based on approximately 85% of usual survey responses, rose for a fourth successive month in February, climbing to 52.3 from 50.3 in January to indicate the strongest expansion of business activity since last May.
February’s upturn was led by the service sector, where business activity rose for a second consecutive month, the index up from 50.8 to 53.0 to register the strongest expansion since last June.
Manufacturers meanwhile eked out a modest gain in production, the factory output index up from 48.9 to 50.4 to signal the first increase in production since last May.
A key change in the services sector was the revival of growth in financial services activity, albeit with real estate remaining in decline, as well as resurgent tourism & recreation and media activity.
Transportation broadly stabilised after seven months of decline, industrial services gained momentum and IT services enjoyed a surge in activity.
On the manufacturing side, chemical & plastics and basic resources remained the main areas of weakness while food & drink, household goods and industrial goods manufacturing showed further signs of recovery. Auto making likewise continued to pull out of the slump seen last year.
Within the euro area, both France and Germany returned to growth for the first times since last October and last June respectively.
The composite PMI for France rose from 49.1 to 51.6, albeit with growth confined to the service sector. The composite PMI for Germany meanwhile edged up from 49.9 to 51.1 reflecting a second successive monthly rise in service sector activity and the first expansion of manufacturing output since last May.
However, it was the rest of the eurozone as a whole that reported the strongest performance, the composite index up from 51.4 to a nine-month high of 53.9 thanks to broadbased growth of manufacturing and services.
The acceleration of growth of output across the eurozone as a whole was fueled by the first, yet modest, rise in new orders since last May, which was in turn driven by the steepest increase in demand for services for nine months and the shallowest – though still marked – drop in new orders for goods over the same period.