Latest data released by Markit - 19 February 2021

  • Prior 45.4
  • Manufacturing PMI 57.7 vs 54.3 expected
  • Prior 54.8
  • Composite PMI 48.1 vs 48.0 expected
  • Prior 47.8

The slump in the services sector is cushioned by the resilience in the manufacturing sector, with the latter posting a three-year high reading - similar to that of Germany earlier.

If anything, it highlights that the drop in economic activity isn't as bad as feared so that is some relative comfort. Adding to that is business expectations continuing to grow more optimistic in February, rising to its highest level since March 2018.

Alongside the market's focus to be more forward-looking, that is good news for the euro; though it will still largely depend on the vaccine rollout in the months ahead.

Markit notes that:

"Ongoing COVID-19 lockdown measures dealt a further blow to the eurozone's service sector in February, adding to the likelihood of GDP falling again in the first quarter. However, the impact was alleviated by a strengthening upturn in manufacturing, hinting at a far milder economic downturn than suffered in the first half of last year. Factory output grew at one of the strongest rates seen over the past three years, thanks to another impressive performance by German producers and signs of strengthening production trends across the rest of the region.

"Vaccine developments have meanwhile helped business confidence to revive, with firms across the eurozone becoming increasingly upbeat about recovery prospects. Assuming vaccine roll-outs can boost service sector growth alongside a sustained strong manufacturing sector, the second half of the year should see a robust recovery take hold.

"One concern is the further intensification of supply shortages, which have pushed raw material prices higher. Supply delays have risen to near-record levels, leading to near-decade high producer input cost inflation. At the moment, weak consumer demand - notably for services - is limiting overall price pressures, but it seems likely that inflation will pick up in coming months."