Eurozone Private Sector Contracts At Slower Pace In February

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The euro area private sector continued to contract in February, albeit at a slower than previously estimated pace, final data from IHS Markit showed on Wednesday.

The final composite output index rose to 48.8 in February from 47.8 in January. The reading was above the flash 48.1 but the score below 50 indicates contraction.

It is becoming clear that many virus-fighting measures will need to be in place for some time to come, in part due to the slow vaccine roll-out, Chris Williamson, chief business economist at IHS Markit said.

This could extend the drag on the economy from the pandemic into the second half of the year and subdue the pace of recovery, Williamson added.

The survey suggested a broadly two-speed economy. The manufacturing sector registered its strongest expansion of output in four months, fuelled by strengthened demand from both domestic and international sources.

On the other hand, the service sector, especially those areas impacted the most by social-contact restrictions, recorded another marked contraction of activity.

The services Purchasing Managers’ Index rose marginally to 45.7 from 45.4 in the previous month. The flash score was 44.7.

The overall contraction was mainly driven by the fall in new orders. On the employment front, there was some positive news as there was a net increase in jobs for the first time in 12 months.

According to the latest data, input cost inflation was recorded for the ninth successive month and to the sharpest degree recorded by the survey since November 2018. At the same time, output charges edged higher for the first time since last February.

Finally, business confidence rose to its highest level for three years underpinned by hopes of a successful rollout of vaccines and a noticeable dialing back of restrictions related to Covid-19 prevention.

Among big-four economies, Italy joined Germany as the only nations to record moderate growth of output in February. Meanwhile, Spain and France logged another sharp contraction.

As strong growth in manufacturing offset continued weakness in services, Germany’s composite output index advanced to 51.1 in February from January’s seven-month low of 50.8. The preliminary reading was 51.3.

The services PMI came in at 45.7 in February, down from 46.7 in the previous month. This was the lowest score since last May and below the flash 45.9.

The French private sector registered its biggest fall since last November driven solely by the service sector.

The composite output index dropped to 47.0 in February from 47.7 in the previous month. Nonetheless, the reading was above the flash 45.2. The services PMI came in at 45.6 in February, down from 47.3 in January but above the flash 43.6.

Italy’s private sector expanded for the first time since last September. The composite output index posted 51.4 in February, rising above the 50.0 mark from 47.2 in January.

At the sector level, rapid manufacturing growth outstripped a further fall in services activity. The services PMI rose to 48.8 from 44.7 in January.

In Spain, a two-speed economy emerged in February as manufacturing output returned to growth, but services activity continued to decline.

The composite PMI logged 45.1 in February versus 43.2 in the prior month. The services PMI posted 43.1 versus 41.7 in January.

The material has been provided by InstaForex Company – www.instaforex.com

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