Business activity continued to struggle in mid-quarter but weakness was less marked than at the start of the year and the economy outperformed expectations. The flash composite output index climbed from a final 47.9 in January to 48.9, some 0.4 points above the market consensus and close enough to the 50-expansion threshold to indicate near-stagnation. This is the highest reading in eight months.

However, the headline improvement was wholly attributable to services where the flash sector PMI rose from January's final 48.4 to 50.0, a 7-month peak. By contrast, its manufacturing counterpart fell from 46.6 to 46.1 and so moved deeper into contraction territory. Manufacturing output has now fallen for 11 straight months.

Aggregate new orders declined again, particularly in manufacturing, and backlogs were similarly pared further. However, employment grew by the most since last July as business optimism about the year ahead climbed to a 10-month high. Supplier delivery times improved after the delays caused by disruptions to traffic in the Red Sea but both input cost and output price inflation accelerated to the highest level since last May.

The February report tentatively suggests that the Eurozone economy is beginning to stabilise. However, there is a wide divergence between the manufacturing and service sectors and the ECB will note with some alarm signs that inflation pressures may be starting to build again. Today's report does nothing to bolster the likelihood of an early cut in interest rates. The region's RPI now stands at 15 and the RPI-P at 26. Both values show overall economic activity moderately outpacing market expectations.

The composite is expected to rise to 48.5 in February versus 47.9 in January. Manufacturing is expected at 47.1 versus January's better-than-expected 46.6 with services expected at 48.7 from January's lower-than-expected 48.4.

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.