Eurozone February final services PMI 50.6 vs 50.7 prelim | Forexlive

• Prior 51.3
• Composite PMI 50.2 vs 50.2 prelim
• Prior 50.2

The drag in the services sector mostly owes to slumps in the French and German economy, which posted readings that were 13-month lows and 2-month lows respectively. Overall business activity still held in expansion territory in the euro area last month, but by a very slim margin to be fair. A sticking point for the ECB is that cost pressures also continue to stay elevated to start the new year. HCOB notes that:

“The Eurozone economy has barely grown for two months in a row now, as the mild growth in the services sector is almost
fully eaten up by the recession in the manufacturing sector. The good news is that the downturn in the manufacturing sector
is softening, which could pave the way for a recovery of the whole economy.

“Ahead of the next ECB meeting, all eyes are on the wage-driven input cost increases given the central bank’s emphasis on
services inflation. With no sign of input cost inflation abating, it is understandable that there are some voices in the ECB who
would like to discuss a pause in rate cuts at the next meeting.

“Service provider’s optimism about future activity is falling short of the long-term average, as the environment is strongly
marked by political uncertainty in France and Germany as well as a flow of international news which does not encourage
consumer spending. At the same time, outstanding business shrank again, which fits into this picture. However, service
providers retain some pricing power as selling price inflation has increased compared to January. Overall, the picture is not
bleak, but fragile.

“There is a big contrast in service sector performance between Germany and France. Germany’s services sector is growing
at a moderate pace while in France, activity is shrinking rapidly and much faster than during the months before. This may be
the result of an unsolved political crisis in France, while in Germany the elections may raise hope for a stable government to
be formed soon.”