Service sector recovers: Eurozone economy grew in February at the strongest rate in nine months

The eurozone economy grew in February at the strongest rate in nine months, reflecting a recovery in the service sector and demand, according to a monthly survey by S&P Global released on Tuesday.

The Purchasing Managers’ Index (PMI) in the eurozone’s private sector rose by two points in February compared to January, reaching 52.3 points, as per preliminary data from S&P Global.

Values above 50 indicate growth in activity, while those below indicate a decline.

– Business activity across the eurozone increased in February much faster than expected, at the strongest pace in nine months, thanks to the accelerated recovery of the service sector – said Chris Williamson, chief business economist at S&P Global.

Activity in the service sector rose for the second consecutive month, the strongest since June, with financial services playing a key role, along with tourism and recreational services and media activity.

The industry, on the other hand, recorded a decline in activity again, but with signs of recovery, primarily in the food, beverage, household goods, and industrial goods manufacturing sectors. The chemical industry and the basic resources sector were a drag.

Average selling prices of goods and services rose again

– The PMI in February was generally in line with the growth of gross domestic product at a quarterly rate slightly below 0.3 percent – Williamson wrote.

Demand increased for the first time since mid-last year, signaling growth in activity in the coming months. Service orders rose at the strongest rate since May, while goods orders recorded the mildest decline during that period, S&P Global found.

The service sector also led the increase in input costs, which were significantly milder in the industry due to the recovery of supply chains and weaker demand.

Average selling prices of goods and services rose sharply again as companies passed on more costs to customers.

Business leaders’ optimism reached its highest level in a year, reflecting eased fears of a deep recession, energy crisis, and prices, S&P Global determined.

Williamson particularly highlights a significant improvement in supply chains.

– Over the past two years, manufacturers have been hindered by delivery delays due to the pandemic, and now they are arriving faster, which means that pricing power is shifting from suppliers to procurement managers in the industry, alleviating the rise in industrial product prices – he explains.