Eurozone PMI Services was finalized at 50.2 in February, up from January’s 48.7, a 7-month high. PMI Composite was finalized at 49.2, up from January’s 47.9, an 8-month high.
Country-specific data revealed varying degrees of economic activity, with Ireland leading the pack with PMI Composite of 54.4, a 12-month high. Spain and Italy followed closely, posting 9-month highs of 53.9 and 51.1, respectively. However, not all news was positive, as France and Germany trailed behind, with Germany recording a 4-month low of 46.3, and France at 9-month low of 48.1.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted two critical insights from the PMI survey in the context of the upcoming ECB meeting on March 7.
Firstly, output prices in the service sector continue to “surge at an accelerated rate”, driven by “escalating wages”, underscores inflationary pressures that are yet to abate.
Secondly, the service sector’s “unexpectedly robust pricing power”, amidst a slow economic recovery and a forecasted growth rate below 1% for 2024, suggests the risk of “a wage-price spiral and stagflation” scenario, exacerbated by structural labor shortages impacting productivity.
“Those advocating late rate cuts may very well find reinforcement in the PMI findings,” de la Rubia noted.
