Eurozone Recovery Gathers Pace, Allays Fears of Recession: PMI

LONDON—The recovery in eurozone business activity gathered pace last month as growth accelerated in the bloc’s dominant services industry, a survey showed, providing the latest piece of evidence suggesting the currency union will avoid a recession.

The Composite Purchasing Managers’ Index (PMI) of S&P Global, which is considered a reliable indicator of economic health, rose to an eight-month peak of 52.0 in February from 50.3 in January. This was slightly below the 52.3 preliminary reading.

February was the second consecutive month that it was above 50, which is what separates growth and contraction.

“A resounding expansion of business activity in February helps allay worries of a euro zone recession, for now,” Chris Williamson, chief economist at S&P Global, said the following:

“There are clear signs that business confidence has picked up from the lows seen late last year, buoyed by fewer energy market concerns, as well as signs that inflation has peaked and recession risks have eased.”

The future output index is a measure of optimism for the year ahead and rose to 61.2 from 60.4, its highest reading since last year.

The PMI for the services sector rose to 52.7 from 50.8, just above the flash reading of 53.0.

The demand picked up and firms were in a position to build a work backlog for the first time since October. The new business index rose to 52.2, from 50.1.

The region’s demand being strong drove prices up again, although at a slower rate than in more than a year.

“There is a concern, however, that signs of persistent elevated selling price inflation, combined with the surprising resiliency of the economy, will embolden the ECB into more aggressive monetary policy tightening, which poses a downside risk to demand growth in the months ahead,” Williamson spoke.

According to Reuters polled economists, a 50 basis point increase in the European Central Bank’s monthly deposit rate is a done deal. They expected a 25 basis point additional lift next quarter, giving a final rate of 3.25 percent.