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A closely watched survey of purchasing managers shows that economic activity in the euro zone is almost stagnant, and some measures of inflation are now back to their final levels nearly two years ago.
The flash reading for the HCOB Purchasing Managers index, written by S&P Global, was 50.2 points in February.
Although the reading remains above the key threshold of 50, which marks the difference between the expansion and contraction of activity, it is weaker than the 50.5 estimate of economists voted by Reuters.
Meanwhile, inflation in corporate input costs is measured higher than any time since April 2023, which could complicate the European Central Bank’s attempt to resist weak growth by lowering interest rates.
It is widely believed that the ECB will reduce borrowing costs in early March, but some of its governance committees on its exchange rate settings are now warning that inflation is higher.
Since October, the monthly investment costs have risen.
“It’s only two weeks before the ECB meeting, and the bad news is being conveyed on the price side. The eurozone’s output “is not moving at all.”
The index fell into expanded territory within five months of January. But the new order continues to decline, which suggests more weaknesses will occur in the coming months.
Commerzbank economist Vincent Stamer said that although the region overcomes “winter dip”, there is “no summer heat”.
Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions, said the rise in price pressure was his “main focus”, adding that the trend “aligns” with the hawkish views of ECB Executive Board member Isabel Schnabel.
In an interview with the Financial Times, Schnabel argued this week that policymakers should now start debate about “pause or pause” to reduce price cuts, as price risks “beat upward” and borrowing costs are much lessened.
S&P Global said the company has once again cut employees’ “due to heavy demand.”
Manufacturing production fell for the 23rd consecutive month.
Germany, the group’s largest economy, has seen some growth ahead of Sunday’s election, which was a two-year stagnation. Meanwhile, France was hit by the activity’s “marks and acceleration”.
In the remaining currency areas, the “stable” expansion stays on track.
