Eurozone Private Sector Logs Fastest Growth In 9 Months

(RTTNews) - Eurozone business activity grew the most in nine months in February, thanks to the improvement in the services activity and the return of manufacturing output to the growth territory amid fading supply-side problems, the purchasing managers' survey by S&P Global showed Tuesday.

The flash composite output index rose more-than-expected to 52.3 in February from 50.3 in the previous month. The expected reading was 50.6.

The reading exceeded the threshold of 50.0 that separates growth from contraction. Moreover, the latest score signaled the biggest growth in business activity since last May.

The upturn was driven by the service sector, where activity grew at the strongest pace since last June. The services Purchasing Managers' Index registered 53.0, up from 50.8 in January and economists' forecast of 51.0.

Meanwhile, the manufacturing PMI unexpectedly fell to a two-month low of 48.5 from 48.8 in the previous month. The reading was seen at 49.3. Nonetheless, the manufacturing output index advanced to 50.4 from 48.9 a month ago.

The survey showed that output growth accelerated in February fueled by rise in new orders. The increase in output was also underpinned by firms again eating into their backlogs of orders.

In manufacturing, input prices rose at the slowest pace since September 2020. In contrast, service sector firms reported another steep rise in input costs. Average prices charged for goods and services continued to rise sharply, increasing at solid rates in both manufacturing and services. Employment grew across manufacturing and services firms in February, albeit at a slower pace due to labor supply shortages and uncertainty around the outlook.

Amid easing fear of a deep recession and reduced worries about energy supply and prices, optimism about the year ahead, at composite level, increased to a one-year high.

February's PMI survey is broadly consistent with the economy growing at a quarterly rate of just under 0.3 percent, Chris Williamson, chief business economist at S&P Global Market Intelligence said.

Persistently elevated inflationary pressures linked to higher wage growth will concern European Central Bank policymakers, Williamson noted.

With the labor market still very tight and price pressures strong, the surveys will reinforce ECB policymakers' conviction that their tightening cycle still has some way to go, Capital Economics' economist Jack Allen-Reynolds, said.

Early this month, the ECB raised its key interest rates by 50 basis points and hinted at a similar move again in March.

The flash survey today showed that within the euro area, both France and Germany returned to growth for the first time since last October and last June respectively.

In the face of easing supply bottlenecks and reduced strain on demand, Germany's private sector grew for the first time in eight months in February. The flash composite output index posted 51.1, up from 49.9 in January and also better than economists' forecast of 50.4.

There were slight increases in activity across the manufacturing and service sectors. The flash services PMI hit an eight-month high of 51.3. Economists had forecast the reading to rise moderately to 51.0 from 50.7.

At 46.5, the manufacturing PMI fell to a three-month low from 47.3 in January. The reading was forecast to improve to 48.0.

France's private sector logged a moderate upturn in February, ending a three-month sequence of contraction. The flash composite output index climbed to 51.6 from 49.1 in the prior month. The expected score was 49.9.

The services PMI improved to a five-month high of 52.8 from 49.4 a month ago. But this was below the expected score of 49.9.

On the other hand, the manufacturing PMI dropped to 47.9 from 50.5, while the score was forecast to rise to 50.8.