Business growth hit a 9-month peak in the euro area. Why’s that?
In Europe, the services sector reported especially high growth recently, surprising markets. It seems that business activity is flourishing in the Eurozone, reaching new heights this month. On Tuesday, a survey showed that it’s expanding much faster than economists anticipated. That means Europe might just be escaping an economic recession. Analysts feared that with gas problems, European countries might struggle this winter. Russia cut gas supplies to Eurozone in retaliation to the sanctions the EU set after the former’s invasion of Ukraine.
Another survey indicated that businesses in Britain also remain robust. Along with an unexpected bounce in activity, the U.K. is enjoying receding price pressures. That is another good news. S&P Global’s index of flash Composite Purchasing Managers soared to a nine-month peak of 52.3 in February. The index was 50.3 in January. Analysts use it to gauge the Eurozone’s overall economic health.
What do the economists say?
Rory Fennessy at Oxford Economics noted that February’s healthy and robust PMI readings pose upside risks to their growth forecast. It’s also raising the odds that the euro area could avoid shrinking in the first quarter. Despite that, he still maintains that growth will still underwhelm in 2023, especially considering that inflation is still high. Soft global growth and tightening financial conditions are other deterrents to economic strength.
Still, business activity rebounded in Germany, Europe’s largest economy, for the first time in eight months in February. Investors think that’s due to easing supply bottlenecks caused by the coronavirus pandemic, as well as improved underlying demand. Consequently, investor sentiment also recovered significantly in Germany this month.
Meanwhile, France’s PMI showed that activity soared in February for the first time since October. Lowering inflation and strength in the jobs market bolstered the country’s economy. Thanks to such positive news, recession fears are fading at last. As a result, the business expectations index surged forward to a nine-month peak of 61.5 this month.
