EMU: PMI Composite Final

Highlights

Eurozone growth gained fresh traction in February, with the composite PMI rising to 51.9, a three-month high, as firmer demand lifted both manufacturing output and services activity. The expansion now stretches to 14 consecutive months, signalling that the private sector is gradually finding its footing after a prolonged period of weakness. Encouragingly, business expectations strengthened further, reaching their most optimistic level since May 2024, driven by a surge in manufacturers' confidence.

However, the recovery remains uneven, and capacity dynamics reveal important fault lines. Growth was broad-based but geographically asymmetric. Germany emerged as the principal growth engine, while France stagnated and Spain recorded its softest expansion in nine months. Activity also outpaced new sales, suggesting that firms relied partly on clearing backlogs rather than solely on new demandyet outstanding work continued to fall, highlighting persistent spare capacity and muted hiring.

The most striking development lies in inflation pressures. Input costs accelerated to a 34-month high, driven by rising operating expenses, while output prices increased at one of the fastest rates in a year. This combination suggests a recovery that is demand-supported but increasingly cost-constrained. The eurozone is expanding, but the balance between growth, capacity, and inflation is becoming more delicate. These updates take the RPI to 12 and the RPI-P to minus 3, meaning that economic activities, adjusted for prices, remain within the expectations of the euro area.

Market Consensus Before Announcement

The consensus sees no revision in the final from the flash at 51.9 for composite and 51.8 for services in the February final.

Definition

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using 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.

Description

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.

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