S&P Global PMI Climbs to Eight-Month High
S&P Global's Composite Purchasing Managers' Index (PMI) rose to an eight-month high of 52.0 in February, up from 50.3 in January, indicating stable economic health. This marks the second consecutive month that the PMI has been above 50, separating growth from contraction.
Business Confidence Boosted by Fewer Energy Market Concerns
"The resounding expansion of business activity in February helps to ease worries of a eurozone recession, for now," says Chris Williamson, a chief business economist at S&P Global. He attributes the improvement to a boost in business confidence due to fewer energy market concerns and a drop in inflation and recession risks.
Optimism for the Year Ahead Rises
The future output index, which measures optimism about the year ahead, rose to 61.2 in February, the highest reading in a year. The PMI covering the services industry also increased, jumping to 52.7 from 50.8. With demand picking up, firms were able to build up a backlog of work for the first time since October, and the new business index rose to 52.2 from 50.1.
Prices Rise, But at Slowest Pace in Over a Year
Businesses across the region raised prices again, though at the slowest pace in over a year. However, Williamson warns that the persistent elevated selling price inflation and the economy's resiliency may encourage the European Central Bank to adopt more aggressive monetary policy tightening, which could risk demand growth in the coming months.
ECB Deposit Rate Expected to Increase
Economists polled by Reuters predict a 50 basis point increase in the European Central Bank's deposit rate this month, with an additional 25 basis point lift expected next quarter, giving a terminal rate of 3.25%.