Eurozone Manufacturing Hits 44-Month High
The Eurozone's factory sector surged to a 44-month high in February, signaling a potential inflection point for the region's industrial economy after a year of contraction. The rebound comes as ECB Chief Economist Philip Lane signaled a likely rate hike in May, suggesting growing confidence in the recovery.
The HCOB Eurozone Manufacturing PMI registered at 50.8 in February, a notable increase from January's 49.5 and the strongest reading since June 2022. This move above the 50.0 threshold officially signals an expansion in the manufacturing sector after a prolonged period of contraction. Germany's factory sector was a significant driver of this rebound, with its PMI reaching 50.9, the most substantial improvement in its factory operating conditions in nearly four years. Greece reported the highest PMI among member states at 54.4, followed by Ireland at 53.1, while France's manufacturing economy remained largely stable at 50.1. The upturn is supported by the fastest growth in new factory orders since April 2022 and an increase in manufacturing output for the eleventh time in the past twelve months. This positive momentum has boosted business confidence among manufacturers to a four-year high. However, the recovery is accompanied by inflationary pressures. Input cost inflation surged to a 38-month high, with firms citing increased energy and metal prices. In response, output prices have risen for the second consecutive month, with the latest increase being the most significant since March 2023. The improved manufacturing data aligns with broader economic forecasts for the Eurozone, which project modest GDP growth for 2026, supported by resilient domestic demand and increased public spending, particularly in Germany. Despite the manufacturing growth, employment in the sector continued to decline in February. The European Central Bank is maintaining a data-dependent approach to monetary policy, with the interest rate on main refinancing operations holding at 2.15% as of the last meeting.
