Eurozone Private Sector Growth Accelerates Unexpectedly
Eurozone private sector activity accelerated in February, with the HCOB Composite PMI rising to 51.9, surpassing expectations. The data indicates the strongest growth since November 2025, driven by the sharpest gain in manufacturing output since August 2025 and faster expansion in the services sector. The euro gained against the yen, which was pressured by softer inflation data in Japan.
- The manufacturing sector was a significant driver of the upturn, with its specific PMI surging to 50.8, the first reading above the 50.0 growth threshold in six months and the strongest improvement in business conditions since June 2022. - A notable rebound in the German economy, particularly its manufacturing sector, was a key contributor to the positive Eurozone-wide figures; Germany's manufacturing PMI crossed the 50-point mark for the first time in nearly four years. - While the services sector continued to expand, its growth was more modest, with the rate of new business slowing and employment levels stagnating, which ended a five-year period of continuous job creation in the sector. - Despite the accelerated growth, underlying demand showed weakness as new export orders for goods and services continued to decline, and overall new orders saw only a marginal increase. - Inflationary pressures are re-emerging, with input costs for businesses rising at the joint-fastest pace in 34 months, largely driven by the resurgent manufacturing sector. - Prior to this data, the European Central Bank held its key interest rates steady in early February, with the deposit rate at 2.00%, maintaining a data-dependent approach without committing to a future rate path. - Forward-looking indicators were mixed; business confidence in the manufacturing sector soared to a four-year high, but overall business confidence for the coming year edged lower. - The current PMI data suggests a potential GDP growth of 0.2% for the first quarter of 2026, a slight slowdown from the 0.3% growth rate indicated by the surveys in the fourth quarter of 2025.
