Eurozone February PMI: Slight Economic Growth with Slowing Manufacturing Decline

Data Interpretation

Summary:

Data released on February 21 showed that the Eurozone Composite PMI for February stood at 50.2, unchanged from January, indicating that the overall economic growth momentum remained stable. The Manufacturing PMI rose to 47.3, a 9-month high, while the Services PMI fell to 50.7, a 3-month low. Despite the slowing decline in manufacturing, weak demand and falling employment still pose challenges to economic recovery.

On February 21, S&P Global released the Eurozone February HCOB PMI report:

HCOB Flash Eurozone Manufacturing PMI at 47.3 (January: 46.6), 9-month high.

HCOB Flash Eurozone Services PMI Business Activity Index at 50.7 (January: 51.3), 3-month low.

HCOB Flash Eurozone Composite PMI Output Index at 50.2 (January: 50.2), Unchanged pace of growth.

The data indicated that the Eurozone private sector maintained a slight expansion in February, with the Composite PMI remaining at 50.2, suggesting that economic growth was still in a marginal state. Although manufacturing output declined for the 23rd consecutive month, the decline was the smallest since May 2024, showing signs of industry stabilization. However, new orders fell for the ninth consecutive month, and corporate employment levels declined, reflecting weak demand and weakening business confidence.

By region, the German economy expanded for the second consecutive month, with a growth rate reaching a nine-month high, while French business activity contracted sharply, registering the fastest decline in nearly one and a half years. Other Eurozone countries performed relatively robustly, with solid output growth.

In terms of employment, the Eurozone private sector staffing levels decreased for the seventh successive month. In fact, the decline in manufacturing employment was the most pronounced in four-and-a-half years. Excluding the COVID-19 pandemic, the fall was the largest since July 2012. Staffing levels dropped in both Germany and France, with the pace of job cuts sharper in the latter. Meanwhile, the rest of the Eurozone saw employment increase at the fastest pace in five months.

Regarding inflation, the latest increase in input prices was the fastest since April 2023 and above the series average, where inflationary pressures remained significant. Manufacturing input prices rose for the second month running and at the fastest pace in six months. In turn, output price inflation also accelerated and was at a ten-month high in February.

Looking ahead, although companies in the Eurozone continued to predict growth of business activity over the coming year, optimism dipped to a three-month low in February. Sentiment dropped across both manufacturing and services alike. Positive expectations in Germany dipped, while optimists in France only just outweighed the pessimists. Overall, market uncertainty, inflationary pressures, and global trade risks remain the main challenges for the Eurozone.

In general, the Eurozone February PMI data indicated that economic growth remained fragile, with signs of stabilization in manufacturing but a slowdown in services growth and low business confidence. In the coming months, the market will closely monitor the European Central Bank's policies and the global economic trend to assess the sustainability of the Eurozone's economic recovery.

Eurozone February PMI

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Eurozone February PMI: Slight Economic Growth with Slowing Manufacturing Decline

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