After slumping in January, France and Germany both are showing economic growth this month, Bloomberg reported, posting growth rates not seen since last May.
S&P Global’s flash Purchasing Managers Index (PMI) for Germany has risen to 51.1, beating analysts’ median expectation of 50.3.
The measure has risen above 50, the dividing line separating growth from contraction, for the first time since June.
The PMI in France rated 51.6, the highest mark since September. Economists had predicted a fourth consecutive month of contraction.
The region’s services sector led the growth, booking its best performance since June. Manufacturers benefited from relaxed supply chains, Bloomberg noted.
In the U.K., the PMI shot from 48.5 last month to 53 this month, partly on the strength of a surprisingly strong government revenue report.
“Growth has been buoyed by rising confidence as recession fears fade and inflation shows signs of peaking,” S&P Global’s chief economist Chris Williamson said in a 21 February statement.
“Manufacturing has also benefited from a major improvement in supplier performance,” he noted.
The flash polls raise hopes that the 20-member Eurozone can evade a recession, although Germany’s Bundesbank still foresees the country’s economy contracting slightly this year.
A possible downside: a stronger-than-expected economy may persuade the Bank of England European Central Bank (EC) that interest rates need to be raised still further.
“The euro-area PMI survey suggests the economy is holding up well under the weight of higher rates,” David Powell, Bloomberg’s senior economist for Europe, told the news service.
“The resilience thus far displayed may allow the hawks at the ECB to push up rates until the start of summer,” he said.
The ECB added a half-point to its key interest rate last month and has indicated it will do so again in March.
“The survey’s inflation gauges add to the likelihood of the Bank of England tightening policy further, and potentially more aggressively,” Williamson said.
TRENDPOST: Europe, and Germany in particular, is still dealing with energy costs that remain abnormally high, even though they have come down notably since last fall. Also, inflation remains untamed.
As the Ukraine war slogs on and Western sanctions continue to bite, odds still favor a European recession this year.