Eurozone business activity growth hits a three-month high

Investing.com - According to the preliminary PMI survey released by S&P Global on Friday, eurozone business activity expanded at the fastest pace in three months in February, with the manufacturing sector performing particularly strongly.

The HCOB Eurozone Composite PMI Output Index rose from 51.3 in January to 51.9 in February, remaining above the 50.0 threshold for the 14th consecutive month, indicating growth rather than contraction. The reading hit a three-month high.

The manufacturing sector led the improvement, with output growing at the fastest rate since August 2025. The HCOB Eurozone Manufacturing PMI Output Index increased from 50.5 in January to 52.1 in February, reaching a six-month high. The overall manufacturing PMI rose from 49.5 to 50.8, hitting a 44-month high and returning above 50.0 for the first time in six months.

The HCOB Eurozone Services Business Activity Index slightly increased from 51.6 to 51.8, reaching a two-month high. Manufacturing output growth for the first time since August 2025 outpaced service sector expansion.

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German business activity recorded robust growth, the fastest in four months, while France’s output remained essentially flat since January. Output in other eurozone regions continued to grow, but at the slowest pace since June 2025.

Eurozone new orders grew at a modest pace, unchanged from January. Manufacturing new orders increased for the first time in six months, with the fastest growth in nearly four years, though new business in the service sector slowed. New business from abroad declined again, with the decline roughly unchanged from January.

Employment declined slightly for the second consecutive month. Manufacturing staffing levels continued to fall, while service sector employment remained unchanged, ending a five-year employment growth streak. France’s employment was flat, Germany’s declined, but employment in other eurozone regions increased.

Backlog of work decreased again in February, but at the smallest rate in four months.

Manufacturers increased procurement activity for the first time in three and a half years, though the expansion was modest. Purchasing inventories continued to decline, but at the slowest rate in the current 37-month decline streak. Finished goods inventories also fell at the slowest pace in two and a half years. Supplier delivery times extended for the ninth consecutive month.

Input costs rose sharply in February, with inflation accelerating to the fastest pace in 34 months, tied for the fastest since February 2025. Manufacturing input prices increased at the fastest rate since December 2022, while service sector input prices grew at a slightly slower pace than in January.

Companies raised selling prices at a slightly lower rate than in January, but the increase remained robust, the second-fastest in the past year. Manufacturing prices rose faster, while inflation in the service sector slowed. Prices in Germany increased steadily, but French companies cut output prices for the first time in three months. Prices in other eurozone regions accelerated.

Business confidence slightly declined from January but remained the second-highest in 21 months. Manufacturing confidence reached a four-year high, while service providers’ optimism slightly weakened compared to January, but they still expect business activity to grow over the next year.

Data collection took place from February 9 to February 18. Final February data for manufacturing will be released on March 2, and data for services and composite indices will be published on March 4.

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