Flash eurozone PMI top five takeaways: Economy ekes out marginal growth as manufacturing downturn eases

The flash PMI® survey data showed the eurozone economy barely expanding midway through the first quarter, putting the region on course for another quarter of sluggish 0.1% GDP growth.

Growth dynamics have changed since late last year, however, with the manufacturing downturn moderating while services growth has trended lower, closer to stagnation.

A changing dynamic is also evident within the region as France's downturn intensified in February while Germany and the rest of the region reported stronger expansions.

A near-stalled employment picture likewise masked variations by country and sector, with the latter perhaps most notable in terms of the increasingly sever, and historically steep, job losses being recorded in manufacturing.

Job cuts could be in part linked to rising costs, for which the rate of inflation picked up again in February, driving output prices higher, notably in the service sector.

Here are our top takeaways from the February flash PMI data:

1. Eurozone economy near-stalled

The seasonally adjusted HCOB Flash Eurozone Composite PMI Output Index, based on approximately 85% of usual survey responses and compiled by S&P Global, was unchanged at 50.2 in February. After signalling a rise in output for the first time in five months during January, the latest data pointed to a sustained but only marginal expansion in activity, consistent with just 0.1% GDP growth after a similar modest expansion was seen in the fourth quarter.

2. Manufacturing downturn moderates further to offset slower services growth

The main source of nay growth was again the euro area's service sector, where activity increased for the third consecutive month but to a weaker extent than the already-sluggish gains seen in December and January.

While manufacturing production continued to fall, down for a twenty-third successive month, the pace of contraction has eased markedly so far this year to the weakest since May 2024, offsetting the slowdown in the service sector.

3. French downturn acts as increased drag on eurozone

The picture of marginal growth seen at the euro area level masked marked differences between the different parts of the currency bloc, notably with France acting as an increasing drag on the region's performance amid an accelerating decline in output.

The Eurozone's largest economy - Germany - recorded a second consecutive monthly rise in output, with the pace of expansion quickening to a nine-month high. A nine-month high was also reported across the rest of the euro area as whole.

In contrast, France posted a marked and accelerated reduction in business activity, one that was the most pronounced for almost one-and-a-half years.

4. Employment continues to be trimmed

Employment fell marginally for a seventh successive month in February, as a slight rise in services employment was countered by another marked reduction in manufacturing workforce numbers. The decline in manufacturing employment was the most pronounced in four-and-a-half years. Excluding the COVID-19 pandemic, the fall was the largest since July 2012.

Staffing levels dropped in both Germany and France, with the pace of job cuts sharper in the latter. Meanwhile, the rest of the Eurozone saw employment increase at the fastest pace in five months.

5. Rising price pressures

Selling price inflation accelerated, hitting a ten-month high in February. A solid rise in charges in the service sector contrasted with a marginal reduction in manufacturing selling prices, the fifth in the past six months.

The overall pace nonetheless remains broadly consistent with headline inflation running only modestly above the European Central Bank's 2% target, according to historical comparisons.

Input cost inflation meanwhile also quickened in February, up to the highest since April 2023, once again driven by services. Although manufacturing input prices rose for the second month running, and at the fastest pace in six months, the rate of increase remained subdued by historical standards.

Output prices were up markedly in Germany, while France saw prices barely rise following a fall in January. The rest of the euro area also saw selling prices rise.

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Chris Williamson, Chief Business Economist, S&P Global Market Intelligence

Tel: +44 207 260 2329

chris.williamson@spglobal.com

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Purchasing Managers' Index™ (PMI^®) data are compiled by S&P Global for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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