Business activity in the European zone showed signs of recovery last month with the bloc's dominant services industry expanding for the first time since July, offsetting a deeper contraction in manufacturing, the survey showed.
The Composite Purchasing Managers' Index (PMI) for the European Union, compiled by S&P Global and seen as a good guide to the overall health of the economy, rose to 49.2 in February from 47.9 in January, beating the initial estimate of 48.9.
That was the best reading since June but still below the 50 reading that separates growth from contraction.
The services PMI rose to 50.2 from 48.4, above the initial reading of 50.0.
“The service sector may start better in 2024 than expected. Although the growth rate is small, it is supported by positive developments in other PMI sub-indicators," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
An index covering new business is nearing its goal level, optimism about the year ahead is at its highest level in more than a year and firms are hiring more. The services employment index rose to 52.7, the highest in eight months from 51.2.
"While employment is traditionally considered an indicator, this trend points to a growing sense of optimism and points towards continued sector recovery," said de la Rubia.
However, there are signs of rising inflationary pressures with both the input price index and the composite output rising. The output price index was at a nine-month high of 54.4, up from 54.2 in January.
The European Central Bank is expected to keep interest rates at the highest level based on historical data on Thursday as it continues to fight to return inflation to target.
