Eurozone picks up pace as growth hits six-year high

Attentions should be on fresh reading of February Markit manufacturing PMIs from France, Germany, Europe and U.S. and final reading of France's January CPI on Tuesday.

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. The 50-point threshold separates expansion from contraction. The jump was unexpected, with economists surveyed by The Wall Street Journal last week having forecast a slight drop in the measure.

"The ECB will be cheered by the signs of stronger growth. though will no doubt remain concerned that elections and Brexit could disrupt the business environment this year", said Chris Williamson, chief economist at IHS Markit.

Manufacturing sector growth continued to outpace the service sector expansion.

At the same time, the services PMI advanced more-than-expected to 54.4 from 53.4 in January.

Average selling prices increased at the fastest pace since July 2011, although the pace was still subdued in comparison with input costs, indicating that there has been a further squeeze on margins. "Overall, solid activity in manufacturing remains the key driver of rising private sector growth".

At 56.2, France's PMI combining both manufacturing and services for February was the highest it has been in almost six years. The composite sub-index measuring employment, at 54.3, was the highest in more than nine years. "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". "Output continued to rise in both monitored sectors", Alex Gill, an economist with the firm added. While French firms reported falling selling prices, their German peers reported the biggest monthly increase since June 2011. If that were to be the outcome for the first quarter, it would mark an acceleration from the 0.4% rate of expansion recorded in each of the third and fourth quarters of 2016.

  • Zachary Reyes