• Prior 48.4
  • Manufacturing PMI 46.1 vs 47.0 expected
  • Prior 46.6
  • Composite PMI 48.9 vs 48.5 expected
  • Prior 47.9

The downturn in the services sector has stabilised in the euro area but is offset but a continued decline in manufacturing conditions. The main drag is none other than Germany as seen here earlier. Europe's largest economy is well and truly the sick man of the group, and there's no denying that.

Going back to the data, employment conditions continued to keep steady but price pressures were marked higher in February. Selling price inflation accelerated for a fourth month running, with the rate of inflation on the month keeping well above the survey's pre-pandemic long-run average. HCOB notes that:

“There is a glimmer of hope as the eurozone inches towards recovery. This is particularly noticeable in the services sector. The corresponding HCOB PMI is now 50 points and has therefore stopped shrinking for the first time since July last year. The latest PMI print gives hope for a recovery in the eurozone, which is why we are sticking to our annual HCOB forecast of 0.8% for 2024. There is also a certain optimism in the latest employment figures, which rose at a faster pace than in the previous month.

“Germany is acting as a brake on eurozone growth. While France is recovering more strongly in both the services and manufacturing sectors, Germany is lagging behind. The services export sector in particular boosted France in February, while it slowed down Germany. One possible explanation for this could be increased tourism activity, which benefits France more than Germany.

“The manufacturing sector is the drag on the European economy. That is clearly demonstrated by the sharp decline in production and the drag on new orders. Accordingly, the companies surveyed have further reduced their workforce and the business outlook for the coming twelve months remains below the long-term average, which tends to reflect pessimism.

“The latest HCOB PMI figures are likely to disappoint the ECB. Output prices have increased at a faster pace for the fourth month in a row. This is entirely due to the labour-intensive services sector, which continues to struggle with rising wages. Our forecast remains that the ECB will cut interest rates for the first time in June.”