Final February PMI data signalled an acceleration in the rate of expansion of the eurozone economy to a 32-month high, an improvement on the mild deceleration indicated by the flash estimate.
The final Markit Eurozone PMI® Composite Output Index came in at 53.3, up from 52.9 in January and the earlier flash posting of 52.7. The economic recovery in the euro area has now stretched to eight consecutive months, the strongest run of growth since the first half of 2011.
Manufacturers continued to lead the upturn. Production rose at a solid clip, despite an easing in growth from January’s high. Although growth in the service sector was modest in comparison, the rate of expansion was nonetheless a 32-month record.
Eurozone companies benefited from strengthening market conditions, as new business rose for the seventh straight month and at the fastest pace since May 2011. However, this failed to translate into meaningful job creation, with staffing levels only negligibly higher than the previous month (although this was still the best outcome for over two years).
Companies indicated that competitive pressures remained a key factor undermining job creation. Many reported pressure to keep headcounts down to offset price discounting offered to stimulate sales, with average output charges having now fallen continuously since April 2012. Input prices rose for the ninth successive month, but the pace of inflation dipped to the lowest since last September.
National data saw Germany replace Ireland at the top of the PMI output growth table. Economic activity in Germany rose at the steepest pace since May 2011, underpinning solid job creation. The recovery in Italy also gained traction, with output rising at the steepest clip for almost three years following a marked acceleration in new order growth. Levels of business activity and new orders in Spain, meanwhile, continued to recover, but at slower rates than in the prior month. France saw output fall at a sharper pace in February, as new orders suffered a further contraction.
On the jobs front, further losses were reported by France, Spain and Italy, as companies held down headcounts to boost competitiveness. All three nations reported reduced selling prices.
Services:
The upturn in the eurozone service sector extended to seven months in February. Business activity and new orders rose at accelerated rates which were the sharpest in the current sequence of recovery, as domestic markets improved in most of the nations covered. Companies also maintained a positive outlook, with business confidence staying close to January’s two-and-a-half year peak.The Eurozone Services Business Activity Index rose to a 32-month high of 52.6 in February, up from 51.6 in January and above the earlier flash estimate of 51.7. All of the nations included in the survey made positive contributions to the upgrade of the final February index reading (compared with earlier flash data), with the largest shares provided by Italy and Germany.
Ireland recorded the steepest expansion of business activity for the twelfth month running, despite seeing its rate of increase ease to the lowest since last November. Germany was second-placed overall, with growth improving to a 32-month record. Italy returned to expansion following declines in the prior three months, and the recovery continued in Spain (albeit at a slower pace).
France was the only nation to report a contraction in business activity. New business also fell again, having improved only once in the past two years (September 2013), mainly reflecting weak demand in the French domestic market.
Service sector employment was broadly unchanged in February. Stronger job creation in Germany and Ireland was offset by accelerated losses in France and Italy and a return to cuts in Spain.
A number of firms indicated that payroll headcounts had been reduced in order to control costs in light of strong competition. This reflected the ongoing discounts many firms were offering to stimulate new business, as highlighted by average selling prices falling again in February. Output charges decreased in France, Italy, Spain and Ireland, but continued to rise in Germany.
Average input prices rose again in February, with increases signalled in all of the nations covered. However, the overall rate of inflation slowed since January and remained below the average for the current sequence of increases.
