Eurozone Recovery Up Despite Soaring Prices, Survey Says

The eurozone economic recovery regained momentum this month as an easing of coronavirus restrictions gave a boost to the bloc's dominant service industry, a survey showed, but consumers faced prices rising at a record rate, Jonathan Cable reported for Reuters.

Photo Insert: Berlin, Germany

As the Omicron coronavirus variant swept across Europe some governments reimposed measures to contain its spread, but with large swathes of the population now vaccinated many of those measures have been eased.

IHS Markit's Flash Composite Purchasing Managers' Index (PMI), seen as guide to overall economic health, jumped to a five-month high of 55.8 in February from 52.3 in January, significantly above the median 52.7 forecast in a Reuters poll.

"The surge in the eurozone flash Composite PMI for February suggests activity is recovering well from the pandemic-related weakness over the winter," said Andrew Kenningham at Capital Economics.

"Having regained its pre-pandemic level in Q4 2021, the eurozone economy is likely to expand at a reasonable pace in the first quarter of this year and should accelerate in the next two quarters as tourism, travel, and hospitality get back to normal."

A flash PMI for the service industry soared to 55.8 from 51.1, a five-month high and above all forecasts in a Reuters poll that had predicted only a modest rise to 52.0. Anything above 50 indicates growth. Improving demand for services pushed business activity across Germany's private sector to a six-month high, while in France growth was stronger than expected, helped by an improvement in the COVID-19 situation.

Factories had another solid month and the flash eurozone manufacturing PMI only dipped from January's 58.7 - where the Reuters poll predicted it would hold - coming in at 58.4. An index measuring output, which feeds into the composite PMI nudged up to 55.6 from 55.4.

Activity could have been faster but lingering supply chain bottlenecks and booming demand meant factories were unable to keep up, and the backlogs of work index rose to 58.7 from 56.9.

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