February saw a broad-based slowdown of the eurozone private sector economy. Rates of output expansion eased across Germany, Italy, Spain and Ireland, while France fell back into contraction for the first time in 13 months. Price pressures also remained on the downside, with modest reductions registered for both output charges and input costs.
The final Markit Eurozone PMI® Composite Output Index fell to 53.0 in February, its lowest reading since January of last year but above the earlier flash
estimate of 52.7. Rates of output growth slowed in both the manufacturing (12-month low) and service (13-month low) sectors.
The level of incoming new business also rose at a weaker pace in February, its least marked in a year. Spain and Ireland reported slower increases, and France saw a contraction, but demand growth ticked higher in Germany and Italy. There were also signs that pressure on capacity eased at eurozone companies, as backlogs of work rose only negligibly.
Employment increased for the sixteenth month in February, with job creation signalled at both manufacturers and service providers. However, the combined rate of increase eased to a five-month low, reflecting the slower growth trends in output and new business.
Staffing levels were raised across the ‘big-four’ euro area economies in February. Modest increases were signalled by Germany and Italy, and Spain saw a faster rate of growth. The pace of increase also ticked higher in France, but remained marginal and the weakest among the ‘big four’.
Deflationary pressures intensified in February. Average prices charged for goods and services both declined at faster rates, as companies competed to win new business. Selling price reductions were seen in France, Spain and Italy, with the decrease especially sharp in France. Germany and Ireland both registered higher output prices, as increases at service providers offset reductions at manufacturers.
Meanwhile, average input costs fell for the second month running and to a slightly greater extent than in January. Manufacturers reported the steepest drop in their purchase prices in over six-and-a-half years. In contrast, service providers continued to see costs increase.
At 53.3 in February, down from 53.6 in January, the final Eurozone Services Business Activity Index fell to its lowest level since January 2015. Three out of the ‘big-four’ national service economies – Germany, Italy and Spain – saw growth of business activity, while France fell back into contraction. The slowdown mainly reflected a weaker rate of improvement in new business received. Slower growth of new work meanwhile filtered through to the labour market and business confidence.
Job creation at euro area service providers slowed to a four-month low, but remained stronger than the average for the current 16-month sequence of growth. All of the nations covered by the surveys reported higher employment.
France reported the weakest increase in payroll numbers and Ireland the fastest, although both saw jobs growth accelerate since January. Germany, Italy and Spain all saw slower expansions in staffing levels than one month earlier.
Business optimism dipped to a three-month low in February. Confidence levels were lower in each of the ‘big-four’ euro area nations and also in Ireland. However, the overall degree of positive sentiment was broadly in line with the long-run survey average.
Input price inflation faced by euro area services firms was little-changed from the moderate rate seen in January, and well below the long-run series average. Falling fuel prices helped to keep cost pressures low. Meanwhile, average output charges declined for the fifth month in a row. Only Germany and Ireland reported increases in selling prices.