Activity in euro zone businesses grew at its quickest pace in nearly six years in February and job creation reached its fastest in almost a decade, driven by robust demand and exports, a survey found.
IHS Markit’s final composite Purchasing Managers’ Index – seen as a good overall growth indicator – rose sharply to 56.0 in February from 54.4 in the previous month. It has not been higher since April 2011 and was unrevised from a flash estimate. The expansion was broad-based, and may put to rest doubts about uneven growth in the region. If sustained, economic growth could hit 0.6 percent in the first quarter, according to Markit.
That would be much faster than the 0.4 percent economists predicted in a Reuters poll just last month, a forecast based on hopes of no major upsets in several national elections this year. [ECILT/EU]
“The final PMI numbers paint a bright picture of a euro zone economy starting to fire on all cylinders. Growth accelerated in all of the four largest member states in February to suggest an increasingly sustainable and robust-looking upturn,” said Chris Williamson, chief business economist at IHS Markit.
“The broad-based improvement has pushed the eurozone PMI into territory consistent with 0.6 percent GDP growth in the
first quarter. The labor market is also starting to boom, with jobs being created at the fastest rate for nearly a decade.” A sub-index measuring employment rose to 53.8 from 53.4, its highest since October 2007. Firms also raised prices faster than at any time in nearly six years. A PMI for the dominant services industry jumped to 55.5 from
53.7 in January, just a tad below the earlier flash reading of 55.6. Suggesting companies are increasingly optimistic about the future, a sub-index measuring business expectations in the service industry jumped to 66.7, the highest since March 2011. Manufacturers, too, enjoyed their best month in nearly six years in February, boosted by a weaker euro, which helped drive strong demand for exports, a similar survey showed on Wednesday.
The renewed strength in the PMIs would come as a welcome relief to the European Central Bank, which is expected to remain on the sidelines through upcoming national elections in three major economies in the currency bloc. [ECB/INT]
“The acceleration in growth, employment and prices signaled by the surveys suggests that analysts will begin to pull forward their expectations of when the ECB could begin tapering its stimulus,” added Williamson.
“However, it seems likely that central bank rhetoric will remain dovish in coming months, focusing on the headwinds that the economy faces in 2017, and specifically the need for policy to remain accommodative in the face of political uncertainty.”
Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.
(Reporting by Rahul Karunakar- Editing by Toby Chopra)
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