EurozonE privatE businEss growth slows in fEbruary
Inflation at just 0.4% in January is nowhere near ECB’s 2% target ceiling
london — Eurozone private business growth increased at its weakest pace for over a year in February, much worse than expected, after activity slowed in Germany and contracted in France, a survey showed on Monday.
The survey, which also provided further evidence of price cutting, is likely to solidify expectations of more monetary policy easing from the European Central Bank in March.
Growth and inflation risks were already on the rise in the euro area, the minutes of the ECB’s January meeting showed, and some policymakers are advocating pre-emptive action in the face of new threats.
Markit’s Composite Flash Purchasing Managers’ Index (PMI) for the eurozone, based on surveys of thousands of companies and seen as a good guide to growth, slumped to a 13-month low of 52.7 from January’s 53.6. A Reuters poll had predicted a fall to 53.3.
“February’s sharp decline in the eurozone Composite PMI supports our view that the region’s economic recovery may well have slowed in Q1. The ECB will need to boost its monetary policy support next month,” said Jessica Hinds at Capital Economics. Economists polled recently by Reuters saw an even chance the ECB will increase the size of its €60 billion a month bondbuying programme when it meets in March, with another deposit rate cut seen as almost certain.
Suggesting Europe is already suffering the repercussions from a global economic downturn, growth in Germany’s private sector slowed for the second month running in February while in France activity contracted for the first time in over a year.
Policymakers will also be concerned about the PMI output price subindex for the bloc, which fell to a one-year low of 48.6, further be- low the 50 mark that separates growth from contraction. It was 48.9 in January.
Inflation was just 0.4 per cent in January, official data showed, nowhere near the ECB’s two per cent target ceiling. The PMI covering the region’s dominant service industry, which was predicted to dip to 53.3 from 53.6, fell to a 13-month low of 53.0. The manufacturing headline index, expected to nudge down to 52.0, instead sank to 51.0 from 52.3. That was below even the most pessimistic forecast.
A sub-index measuring output, which feeds into the composite PMI, plummeted to a 14-month low of 51.9 from 53.4.
And there is scant prospect of a sharp improvement next month as factory new orders picked up at their weakest pace in a year. The sub-index fell to 51.6 from 53.0.
As a result, after being their most confident about the year ahead since mid-2011 last month, optimism at service firms has tanked in February. The business expectations index staged one of its biggest one-month falls in the survey’s history, slumping to 61.6.
A Reuters poll earlier this month predicted growth of 0.4 per cent this quarter.