Eurozone Private Sector Continues To Contract In February

The euro area private sector continued to contract in February, as extended lockdown measures weighed on the service sector, flash survey results from IHS Markit showed on Friday.

The composite output index rose to 48.1 in February from 47.8 in January. The expected reading was 48.0.

The score has been below 50.0 for the fourth consecutive month suggesting contraction. The survey revealed that the service sector downturn was offset by faster manufacturing growth.

The services Purchasing Managers’ Index fell to 44.7 from 45.4 a month ago. Economists had forecast a reading of 45.9.

On the other hand, the manufacturing PMI surged to a 36-month high of 57.7 from 54.8 in the previous month. This was above consensus forecast of 54.3.

Ongoing COVID-19 lockdown measures dealt a further blow to the eurozone’s service sector in February, adding to the likelihood of GDP falling again in the first quarter, Chris Williamson, chief business economist at IHS Markit said.

The deterioration in output was driven by the service sector. In contrast, manufacturing output growth accelerated to the fastest since October.

Business expectations improved to the highest for nearly three years as companies looked ahead to vaccine roll-outs.

However, surging demand and constrained supply contributed to a further marked rise in prices during the month. Average prices paid for inputs by manufacturers rose at a rate not seen since 2011. At the same time, a more moderate rise in costs was seen in the service sector.

Overall average rates charged for both goods and services were unchanged in February.

France’s private sector shrank at a faster pace in February. The composite output index fell to a three-month low of 45.2 in February from 47.7 in January.

Service providers posted another decline in activity, while manufacturers saw a moderate expansion. The services PMI dropped sharply to 43.6 from 47.3 in January. The score was forecast to fall marginally to 47.0.

The manufacturing PMI came in at 55.0 in February, up from 51.6 in January. The expected score was 51.4.

Meanwhile, Germany’s private sector expanded further driven by the strong rebound in manufacturing despite increasing supply-side pressures.

The composite output index rose to 51.3 in February from 50.8 in January. Economists had forecast the score to fall to 50.5.

While Covid-19 lockdown measures continued to weigh on activity across large parts of the services economy, factories reported strong and accelerated growth due in part to surging export orders.

The manufacturing PMI surged to a 36-month high of 60.6 from 57.1 in January. The score was above economists’ forecast of 56.5.

Meanwhile, the services PMI fell to a 9-month low of 45.9 from 46.7 in the previous month. This was below the expected 46.5.

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