Eurozone: Composite PMI hits 70-month high in February

Recent data suggest that the Euro area’s economic recovery kicked into a higher gear in February. The preliminary Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, rose from January’s 54.4 to 56.0 in February, the best result in nearly six years. The result overshot market analysts’ expectations of a slight fall to 54.3.

February’s reading reflected robust activity in both the manufacturing and services sectors. Notably, Eurozone employment grew at the strongest pace seen in over nine years and business optimism increased boding well for the region’s outlook. New orders rose at the fastest pace since April 2011 amid an upturn in both foreign and domestic demand. Price pressures intensified and input costs rose at the fastest pace in over five years due to a depreciated euro and rising commodity prices.

Regarding the two largest Eurozone economies, economic conditions improved in both France and Germany. Elsewhere in the region, economic momentum gained steam and job creation hit a seven-month high. Commenting on the result, IHS Markit analysts stated that, “the rise in the flash PMI to its highest since April 2011 means that GDP growth of 0.6% could be seen in the first quarter if this pace of expansion is sustained into March.”

FocusEconomics Consensus Forecast panelists expect the Eurozone economy to expand 1.5% in 2017, which is unchanged from last month’s forecast. For 2018, panelists expect the economy to grow steadily at 1.5%.