Eurozone Private Sector Growth At 6-month High
Euro area private sector grew for a third straight month and at the fastest pace in six months in February, mainly led by further expansion of the services sector, though there were signs of demand and production being hurt by the coronavirus outbreak in China.
Elsewhere on Friday, final data from Eurostat confirmed that Eurozone inflation accelerated for the third straight month in January.
The flash composite purchasing managers’ index, or PMI, climbed to 51.6 from 51.3 in January, preliminary survey data from IHS Markit showed on Friday. Economists had forecast a score of 51.
A PMI reading above 50 suggests growth in the sector. The latest reading was the best since August.
The flash services PMI rose to a two-month high of 52.8 from 52.5 in January. Economists had expected a reading of 52.2.
The flash manufacturing PMI rose to a 12-month high of 49.1 from 47.9 in January. Economists had forecast a weaker score of 47.5.
The flash manufacturing PMI output index climbed to an eight-month high of 48.4 from 48 in January.
“While the February survey data are welcome news in a month in which media headlines have been dominated by fears of economic growth being hit by the COVID-19 outbreak, the full immediate impact may not yet be apparent,” IHS Markit Chief Business Economist Chris Williamson said.
Eurostat data showed that inflation climbed to 1.4 percent from 1.3 percent in December. The rate was in line with the flash estimate.
Core inflation that excludes prices of energy, food, alcohol and tobacco, eased to 1.1 percent in January from 1.3 percent in the previous month.
Nonetheless, headline inflation remained well below the European Central Bank’s target of “below, but close to 2 percent.”
The IHS Markit survey showed that new order growth remained subdued and the pace of expansion was unchanged from January’s seven-month high. Despite the new business growth, backlogs continued to decline signalling persistent excess capacity.
In the service sector, new business growth slowed slightly, partly due to the weakness in travel and tourism. The coronavirus outbreak partly hurt some areas of business. In manufacturing, new order growth fell for a seventeenth successive month, but the decline was the smallest in over a year as stronger demand from the domestic market offset a slump in export orders.
Manufacturing was constrained by a marked lengthening of supplier delivery times. Supply chain disruptions caused by the coronavirus outbreak were largely to blame for the delays that were the most widespread since December 2018.
Private sector employment continued to rise at a weaker pace due to subdued new business growth and sustained the softest spell of job creation seen for five years. Job growth in the services sector was the weakest in 13 months, while job losses in manufacturing hit a three-month low.
Average input price inflation slowed from January’s eight-month high, while average selling prices rose at the joint slowest rate for over three years. Service sector costs and prices rose, but factory costs and charges continued to fall. Average prices charged for goods dropping at the fastest rate for almost four years.
Output growth expectations dropped from January’s 16-month high, but remained well above the average of 2019. Business sentiment weakened in both services and manufacturing.
In the biggest euro area economy, Germany, the private sector growth was largely unchanged in February with the flash composite PMI slightly easing to a two-month low of 51.1 from 51.2 in January. Economists had forecast a score of 50.8.
The services PMI eased to a two-month low of 53.3 from January’s 54.2. Economists had expected a score of 53.8. The flash manufacturing PMI hit a 13-month high of 47.8 from 45.3 in January. Economists had expected a score of 44.8. The manufacturing output index rose to a nine-month high of 47.
In France, the flash composite PMI hit a two-month high of 51.9 versus 51.1 in January. Economists had expected a score of 51. The services PMI climbed to a four-month high of 52.6 from 51 in the previous month, topping economists’ forecast of 51.3. The manufacturing PMI, however, fell to a seven-month low of 49.7 from 51.1 in January. Economists had expected a higher score of 50.7.
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