Despite hints of recovery in Germany and a steep fall in France, the eurozone economy remained stagnant in February, according to business surveys published on Friday.
According to a study released Friday by Hamburg Commercial Bank and S&P Global, the composite purchasing managers’ index for the euro area, which measures activity among industrial and service firms in the biggest economy in Europe, remained at 50.2, unchanged from January. That was just below the 50.5 predicted by economists in a Wall Street Journal poll.
The survey, which came in just above the 50 no-change threshold, shows that activity increased this month, but only marginally.
Ahead of a national election on Sunday, Germany’s economy, the biggest in Europe, is beginning to rebound after seeing its second consecutive year of contraction in 2024. Following the dissolution of the current coalition due to differences over fiscal policy, investor confidence increased slightly this month in the expectation that the incoming administration would be better equipped to implement policies to address the nation’s economic slump.
However, the PMI data showed that activity in France, Germany’s neighbor, fell to a 17-month low. Given the recent reduction in political unpredictability following Prime Minister Francois Bayrou’s passage of a 2025 budget, the economic setback may come as a surprise.
According to Hamburg Commercial Bank chief economist Cyrus de la Rubia, “there is definitely hope for a German government that will be able to act after the elections, which should also provide a positive impetus for the eurozone as a whole.”
However, he warned, that is outweighed by French instability and an uncertain U.S. trade strategy.
In addition to declaring that he will undoubtedly impose tariffs on imports from the European Union, President Trump said that value-added taxes imposed by European countries have an adverse effect on trade that disadvantages the United States and should be taken into consideration when making future duty determinations.
According to Ursula von der Leyen, president of the European Commission, retaliatory tariffs are also inevitable, with steel import duties scheduled to be implemented in March expected to receive a “firm and proportionate” reaction.
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Manufacturing’s PMI survey score lags behind that of the services sector, which is probably due to ongoing trade and geopolitical instability as well as the industry’s ongoing recession. Industrial production is around 10% less than its prepandemic level due to high energy costs and competition from China.
Continental, an auto components manufacturer, announced this week that it would eliminate about 3,000 jobs, including in its home base of Germany, joining the list of industrial companies that are laying off workers.
According to the report, pricing pressures persisted, especially because energy prices were remained high. It occurs before a meeting of the European Central Bank in early March, when rate cuts are anticipated once more.
Bert Colijn, an economist at ING, noted that “cost pressures do continue to creep up for businesses, even though the ECB seems convinced that inflation is under control.”
Additionally, U.K. activity almost stagnated, with the largest decline in private sector jobs since 2020.
According to Chris Williamson, chief business economist at S&P Global Market Intelligence, the Bank of England faces a stagflationary environment as a result of the lack of growth and growing pricing pressures. At its meeting earlier this month, the bank cut its growth projections for the year.
However, there are indications of a rapid acceleration abroad, which contrasts with Europe’s stagnation. Similar business surveys indicated that the first few weeks of February saw an increase in activity in Australia, Japan, and India.
