- Prior 51.6
- Composite PMI 51.9 vs 51.9 prelim
- Prior 51.3
The euro area economy is seen holding up well to start the year amid improved demand conditions. In particular, Germany looks to be one to help shoulder the economic burden after having been the main drag for a long time. The only troubling spot is perhaps that there is a notable rise in cost pressures. Besides that, output charges also remain elevated even if it has eased marginally from January with the rate being the second-steepest in a year.
HCOB notes that:
“The service sector did not perform particularly well in February, but momentum did increase slightly when compared with
the previous month. Other encouraging signs include the slightly stronger increase in new business and the optimism
towards business activities in the future. However, the fact that growth remains subdued overall is reflected, among other
things, in the fact that companies have hardly hired any new staff on balance in the past two months.
“For the European Central Bank (ECB), these data are certainly one more reason why it is unlikely to plan any further
interest rate cuts for the time being. Costs faced by the service sector rose at a high rate once again in February. Higher
wages, but also rising energy and transport costs, are cited as reasons for this. From the ECB’s perspective, the decline in
inflationary pressure on sales prices is a positive development, but no clear trend has emerged in recent months.
“At the national level, Germany enjoyed the strongest momentum in its service sector, while growth slowed slightly in Italy
and significantly in Spain. The French service sector continues to contract, but the decrease in business activity has
softened. All in all, it could be difficult for the eurozone service sector to expand at the same rate in the first quarter as in the
final quarter of 2025.
“Germany could become the driving force of the eurozone in the coming months. In February, the country took the lead
among the four major eurozone countries in terms of economic expansion rate, followed by Italy, Spain, and France. In
Germany, there are increasing signs that additional spending on infrastructure and defence is having a positive economic
impact, which should also spill over to other eurozone countries.”
