Eurozone business growth slows more than expected in February

Business growth in the eurozone slowed more than expected this month, according to data released on Wednesday, although it remains firm overall.

The flash eurozone composite purchasing managers' index - which measures activity in both the services and manufacturing sectors - fell to 57.5 from January's 12-year high of 58.8, missing expectations for a reading of 58.5.

A reading above 50 indicates expansion, while a reading below signals contraction.

Meanwhile, the manufacturing PMI dropped to 58.5 from 59.6, falling short of expectations of 59.3.

The PMI for the services industry printed at 56.7 this month from 58.0 in January, missing expectations for a reading of 57.6.

Growth in Germany was at a three-month low, while in France, the composite PMI moderated to its weakest level in four months. However, both PMI readings remained at levels indicative of strong growth, close to seven-year highs.

The flash German PMI composite index fell to 57.4 from 59.0 in January, undershooting a forecast of 58.5, while the manufacturing PMI declined to 60.3 from 61.1, coming in below the 60.6 expected.

For France, the composite PMI dropped to 57.8 from 59.6, below the 59.4 expected, while the manufacturing PMI fell to 56.1 from 58.4, missing expectations for a reading of 58.0.

Chris Williamson, chief business economist at IHS Markit, said: "February saw the eurozone’s growth spurt lose a little momentum, but the rate of expansion remains impressive, putting the region on course for its best quarter for almost 12 years. The PMI readings for the first two months of the quarter generally provide a reliable guide to official GDP growth, and indicate that the eurozone economy is expanding at a quarterly rate of 0.9% in the opening quarter of 2018.

"It remains to be seen if growth will continue to slow in coming months. However, a rise in business optimism about the year ahead to a joint-survey high bodes well, suggesting that companies are expecting the slowdown to be short-lived."

Jessica Hinds, European economist at Capital Economics, said that despite the drop in the composite eurozone PMI, the index is still at a very high level and consistent with continued healthy growth this year.

"February’s drop reflected a fall in the forward-looking new orders component, which does not bode well for March and the first quarter as a whole. But with the headline output index at such a high level and currently consistent with quarterly GDP growth accelerating from the fourth quarter's 0.6% towards 0.8%, another small fall in the PMI next month would still point to a healthy pace of growth. The euro-zone composite output price index remained elevated, suggesting that the strength of the economy is prompting some inflationary pressure."