At a seven-month high of 53.7 in February, the Eurozone Services Business Activity Index / PMI (purchasing managers' index) signalled an acceleration in the rate of expansion of services output for the third month in a row. Business activity has now risen in each month since August 2013. However, the index posted slightly below the earlier flash estimate of 53.9. The latest expansion reflected a solid increase in new business, which rose at the quickest pace for eight months. The improved inflow of new work contributed to further growth of both backlogs of work and employment. Outstanding business increased for the second month running and to the greatest extent since May 2011.
Meanwhile, Markit said that job creation hit a 45-month high. By nation, activity growth was again led by Ireland and Spain, despite rates of expansion easing in both cases, while Germany also saw a solid increase in business activity.
Rates of job creation also accelerated in each of these nations. Services output swung back into expansion territory in France, rising at the fastest pace for three-and-a half years and underpinned by the steepest increase in new business during that period. The trend in employment moved closer to stabilisation.
The weakest performer was Italy, which saw services output stagnate and was the only nation covered by the survey to report lower new business inflows. Employment rose fractionally for the first time since May 2011. Business optimism† improved in the euro area service sector during February, edging up to its highest level since mid-2011.
Confidence improved in almost all of the nations covered by the survey, the sole exception being Germany. On the prices front, average costs rose again during February. Moreover, the rate of increase accelerated since January, which had seen the weakest rise in costs since February 2010. Average service sector charges, meanwhile, fell for the thirty-ninth straight month.
Output prices fell in France, Italy and Spain, with by far the steepest reduction registered in France. In contrast, Germany and Ireland reported increases. † for business optimism, companies are asked whether they expect levels of business activity in one year’s time to be higher, the same or lower than the current month.
Chris Williamson, chief economist at Markit said: “There were clear signs of the Eurozone economy reviving in February, with stronger inflows of new business and rising business confidence suggesting growth should continue to pick up in March. “The increasingly positive survey data put the region’s GDP on course to grow by 0.3% in the first quarter. “With employment rising at the strongest rate for three-and-a-half years, unemployment should fall further from the 11.2% rate seen in January. “An easing in the rate at which companies cut their prices meanwhile also suggests that that consumer price deflation will continue to moderate.
“February was noteworthy in being the first month since last April when all four of the largest Eurozone member states recorded an expansion of business activity. Most encouraging of all are the signs of renewed growth in France, where service sector expansion offset an ongoing manufacturing slump.
“The best performances are being seen in Ireland and Spain, set to grow by at least 1% and 0.7% respectively in the first quarter. More modest growth of 0.3% is signalled for Germany, and France and Italy are on course to expand by just 0.2% and 0.1% respectively. “The outlook has brightened for all countries. Concerns about ‘Grexit’ and contagion to other countries have eased, the weaker euro should help boost exports and, perhaps most importantly, the commencement of quantitative easing by the ECB should stimulate the economy as we move through the year.”