The Eurozone economy saw a second successive month of positive growth in February. The flash composite output index rose from January's final 50.3 to 52.3, fully 1.5 points above the market consensus and a 9-month month high.

However, the headline improvement was dominated by services where the flash sector PMI climbed from January's final 50.8 to 53.0, an 8-month peak. By contrast, its manufacturing counterpart fell from 48.8 to 48.5, well in recession territory.

Within manufacturing, output (50.4 after 48.9) at least recorded its first gain since last May but the good news here was tempered by another fall in new orders. Services fared much better, registering the steepest increase in new demand in nine months. Even so, backlogs were trimmed again in both sectors, notably so in manufacturing. Indeed, the rate of overall job creation edged down from January's 3-month high and continued to run well below rates seen this time last year. In part this reflected labour supply shortages but uncertainty about the outlook was also a factor. To this end, business expectations edged up to a 1-year peak but were only in line with their long-run average.

Improved vendor performance on the back of fewer supply chain shortages helped manufacturers' input cost inflation slide to its lowest level since September 2020 but the rate in services climbed and was historically very firm. Moreover, average prices charged for goods and services continued to rise sharply, although the inflation rate did moderate versus January.

Taken at face value, the January/February PMI data point to first quarter Eurozone GDP growth of about 0.3 percent. However, much of this looks likely to be provided by the smaller member states as the larger countries continue to struggle. In any event, cost pressures in general are still too strong and wages in particular remain a threat to the ECB's inflation target. Today's update puts the region's ECDI at 5 and the ECDI-P at minus 3, both measures showing that overall economic activity is currently running much as expected.

Eurozone services edged into plus-50 positive ground in January to 50.8 with manufacturing improving to 48.8. And further improvement, though slight, is expected in February, at 49.3 for manufacturing and 51.0 for services.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The survey, produced by S&P Global uses a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.