Euro zone services hit in February but factories raced: PMIs

LONDON (Reuters) – Business activity across the euro zone resumed in February when lock-in measures to contain the coronavirus worried the blockchain’s dominant service industry, a study showed, even as the busiest month at factories in three years.

With diseases reported every day high governments have encouraged citizens to stay at home and closed much of the continent’s hospitality industry while factories have remained largely open.

IHS Markit’s flash PMI, seen as a good guide for economic health, was moving closer to the 50 mark separating growth from shortening, recording 48.1 in February compared to 47.8 in January. The Reuters poll had a forecast of 48.0.

However, some of that activity was from the completion of old orders. The backlog of index fell to 47.9 from 49.0.

“COVID-19 continued lock-in measures delivered another blow to the eurozone service sector in February, adding that GDP is set to fall again in the first quarter,” said Chris Williamson, chief business economist at IHS Markit.

The euro zone economy is in a double-dip recession, according to Reuters accounting last week of economists, who said the risks to their already weak outlook had been further exacerbated by the downturn. [ECILT/EU]

PMI covering the services industry fell to 44.7 from 45.4 in January, well below the median expectation in a Reuters poll for 45.9.

But with vaccine programs accelerating, driving hopes for a return to some sort of norm, hopes have improved dramatically over the coming year. The services industry expectations index climbed to its highest level since April 2018.

“Incorporating vaccine distribution can stimulate growth in the service sector coupled with a strong sustainable manufacturing sector, it should have a strong recovery in the second half of the year,” Williamson said.

Strong demand for manufactured goods helped the factory’s PMI to 57.7 from 54.8, the highest level since February 2018 and well above all forecasts in a Reuters poll that predicted 54.3. Index measuring yield, which feeds into the mixed PMI, jumped to 57.5 from 54.6.

The new orders index also went up and factories hired additional workers for the first time in nearly two years. The employment index rose to 50.9 from 49.4.