Eurozone Private Sector Contraction Slows As Services Activity Stabilize

(RTTNews) - Eurozone private sector shrank at the slowest pace in eight months in February as a stabilization of output in the service sector offset a further steep contraction in manufacturing, flash survey results from S&P Global showed on Thursday.

The flash HCOB composite output index posted 48.9 in February, up from 47.9 in the previous month. The expected score was 48.5.

Although the below-50 score still signals contraction in the private sector, February's fall was the smallest since last June.

The services Purchasing Managers' Index, or PMI, rose to a seven-month high of 50.0 from 48.4 a month ago. The reading was seen at 48.8.

On the other hand, the manufacturing PMI fell to 46.1 from 46.6 a month ago. The expected score was 47.0.

"There is a glimmer of hope as the eurozone inches towards recover", Hamburg Commercial Bank Economist Norman Liebke said.

Nonetheless, the economist said the latest PMI figures are likely to disappoint the European Central Bank as output prices increased at a faster pace for the fourth month in a row.

Capital Economics economist Andrew Kenningham said the PMI data does not dramatically change the picture for the ECB.

But it does mean that there is a growing chance that the ECB will wait until June to cut interest rates rather than doing so in April, the economist added.

Elsewhere, official data confirmed that the euro area inflation for January eased to 2.8 percent from 2.9 percent in December.

Likewise, core inflation that excludes prices of energy, food, alcohol and tobacco, slowed to 3.3 percent in January from 3.4 percent a month ago.

"While inflation remained relatively benign in recent months, signs like this are good arguments for hawks to push against rate hikes in the coming two meetings," ING economist Bert Colijn said.

By country, a deepening contraction in Germany and sustained output fall in France were countered by faster improvement in the rest of the region, the PMI survey showed. The private sector downturn in Germany deepened further with an accelerated reduction in manufacturing output.

The composite output index dropped to a four-month low of 46.1 in February from 47.0 in January. The expected reading was 47.5.

At 48.2, the services PMI climbed from 47.7 in January. The score was also above forecast of 48.0.

By contrast, the manufacturing PMI slid to a four-month high of 42.3 from 45.5 a month ago. The reading was seen at 46.1.

Although France's economy remained stuck in the contraction territory, private sector output fell at the slowest pace in the current nine-month sequence of decline.

The composite output index rose to a nine-month high of 47.7 from 44.6 in the prior month. The score was also above economists' forecast of 45.0 but below the neutral 50.0 indicating contraction. At 48.0, the services PMI increased from 45.4 in January. The expected score was 45.7.

The manufacturing PMI came in at an 11-month high of 46.8, up from 43.1 in the previous month. The score was also above forecast of 43.5.