The economic activity in the euro area showed promising signs of nearing recovery last month, with a notable expansion in the services sector, marking the first growth since July and helping to mitigate the continued shrinkage in manufacturing, according to a recent survey. The composite PMI, a key indicator of the economic health compiled by S&P Global for the euro zone and presented by HCOB, rose to 49.2 in February from 47.9 in January, surpassing the initial estimate of 48.9. Despite this improvement and reaching its highest point since June, the index still indicated a contraction, remaining below the crucial 50 threshold.
The services sector’s PMI climbed above the neutral mark to 50.2 from 48.4, exceeding the preliminary estimate of 50.0 and hinting at a more optimistic start to 2024 than expected. Employment in the services sector also saw an uplift, with the employment PMI hitting a high of 52.7, the highest in eight months. Nevertheless, the survey highlighted growing inflationary pressures, with both input and output price indexes on the rise. The output prices index reached a nine-month peak at 54.4. Amid these developments, the European Central Bank is likely to maintain its high-interest rates to combat inflation, with predictions suggesting a possible reduction in rates not occurring until June, as per a Reuters survey.
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