The growth rate of eurozone economic output accelerated for the third straight month in February, rising to its highest since July of last year. At 53.3, the final Markit Eurozone PMI® Composite Output Index signalled an expansion for the twentieth month in a row, but came in slightly softer than the earlier flash estimate of 53.5. For the first time since April 2014, expansions in economic activity were signalled across each of the ‘big-four’ eurozone economies.
By nation, output growth was again led by Ireland and Spain. The rate of expansion in economic activity also accelerated to a four-month high in Germany, while Italy saw output rise for the second month running (albeit at a slower pace).
A key development from the February surveys was that France exited stagnation, with the region’s second-largest economy seeing the strongest growth of both output and new business since August 2011.
Eurozone companies saw output pushed higher by rising levels of incoming new business. New order inflows improved for the third month running and at the fastest pace since July 2014. There were also signs that the upturn in demand tested capacity at some firms, as backlogs of work rose for the first time in ten months.
The combination of increased new order volumes and growth in outstanding business encouraged further job creation. Employment rose at the quickest pace in three-and-a-half years during February. Staffing levels were increased in Germany, Italy, Spain and Ireland, while in France the trend moved closer to stabilisation.
Average input prices rose slightly in February, as higher costs in the service sector offset a further oil related slump in purchase prices at manufacturers. Meanwhile, average output charges fell again during February, continuing a trend observed since April 2012. However, the rate of decline was slower than in January, which had seen the largest decrease for almost five years. Selling prices fell sharply in France and were also reduced in Spain and Italy. In contrast, charges rose in Germany and Ireland.
At a seven-month high of 53.7 in February, the Eurozone Services Business Activity Index signalled an acceleration in the rate of expansion of services output for the third month in a row. Business activity has now risen in each month since August 2013. However, the index posted slightly below the earlier flash estimate of 53.9.
The latest expansion reflected a solid increase in new business, which rose at the quickest pace for eight months. The improved inflow of new work contributed to further growth of both backlogs of work and employment. Outstanding business increased for the second month running and to the greatest extent since May 2011. Meanwhile, job creation hit a 45-month high.
By nation, activity growth was again led by Ireland and Spain, despite rates of expansion easing in both cases, while Germany also saw a solid increase in business activity. Rates of job creation also accelerated in each of these nations.
Services output swung back into expansion territory in France, rising at the fastest pace for three-and-a-half years and underpinned by the steepest increase in new business during that period. The trend in employment moved closer to stabilisation.
The weakest performer was Italy, which saw services output stagnate and was the only nation covered by the survey to report lower new business inflows. Employment rose fractionally for the first time since May 2011.
Business optimism improved in the euro area service sector during February, edging up to its highest level since mid-2011. Confidence improved in almost all of the nations covered by the survey, the sole exception being Germany.
On the prices front, average costs rose again during February. Moreover, the rate of increase accelerated since January, which had seen the weakest rise in costs since February 2010. Average service sector charges, meanwhile, fell for the thirty-ninth straight month.
Output prices fell in France, Italy and Spain, with by far the steepest reduction registered in France. In contrast, Germany and Ireland reported increases.