Eurozone private sector activity gained momentum in February, amid strong job creation, robust order books and business optimism, leading to the fastest expansion in nearly six years.
The flash Eurozone Composite Output Index, which combines manufacturing and services, rose to 56.0 from 54.4 in January, results of the purchasing managers' survey by IHS Markit showed Tuesday.
A reading above 50 suggests growth in activity. The latest reading was the highest since April 2011. Economists had forecast a score of 54.3.
Based on the latest survey data, IHS Markit estimates 0.6 percent growth for the euro area in the first quarter if the pace of expansion is sustained.
"With inflows of new orders also surging and firms becoming even more optimistic about the year ahead, growth could even lift higher in coming months," IHS Markit economist Chris Williamson said.
"The ECB will be cheered by the signs of stronger growth and further upturn in price pressures, though will no doubt remain concerned that elections and Brexit could disrupt the business environment this year," the economist said.
Williamson do not expect any change in the ECB policy stance until at least after the German elections in September.
Manufacturing sector growth continued to outpace the service sector expansion. Both growth levels were the highest since early 2011.
The flash Eurozone Manufacturing Purchasing Managers' Index climbed to 55.5 from 55.2 in January. Economists had forecast a reading of 55.
The flash Eurozone Services PMI rose to 55.6 to 53.7 in January, while economists had forecast the reading to remain unchanged.
New orders grew at the fastest pace in nearly six years in both manufacturing and services sectors. A weaker euro supported rising demand for factory exports, which was also the highest since April 2011.
Private sector employment logged the biggest increase since August 2007 with robust job creation in both sectors amid improved confidence about the outlook. Despite this, outstanding work increased.
Business expectations about activity levels in a year's time rose to the highest since comparable data were first available in July 2012. Confidence improved in the services sector, while weakened slightly in manufacturing.
Meanwhile, inflation pressures continued to increase with input costs rising at the fastest rate since May 2011. Cost pressures intensified in both sectors with manufacturing logging the steeper climb.
This was mainly due to higher global commodity prices, the weak euro and suppliers regaining some pricing power amid stronger demand.
Selling prices increased at the steepest rate since July 2011 as firms passed on higher costs to customers. The rate of inflation was muted versus that for input costs, suggesting margins remained under pressure, IHS Markit said.
Both Germany and France witnessed robust growth in private sector activity in February with solid demand gains and job creation. While the expansion was driven by manufacturing in the former, the services sector led growth in the latter.
The flash German Composite PMI rose to a thirty-four-month high of 56.1 from 54.8 in January. The corresponding measure for France climbed to a sixty-nine-month high of 56.2 from 54.1 in January.
Input costs rose at the fastest pace since mid-2011 in both sectors. While French firms reported falling selling prices, their German peers reported the biggest monthly increase since June 2011.
IHS Markit's Williamson said the big surprise in the latest survey was France, where the PMI inched above that of Germany for the first time since August 2012. The economist estimated 0.6-0.7 percent growth in the first quarter for both countries.
"France's revival represents a much-needed broadening out of the region's recovery and bodes well for the eurozone's upturn to become more selfsustaining," Williamson added.
by RTT Staff Writer
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