Eurozone private sector growth stayed weak in February, with inflationary pressures on the rise. While France’s activity declined, Spain and Italy outperformed, putting the European Central Bank (ECB) in a difficult position regarding potential rate cuts.

The eurozone’s economic growth remains sluggish, as shown by the private sector’s minimal expansion in February, which is just enough to maintain growth. Inflationary pressures, however, are starting to escalate again, causing a dilemma for the European Central Bank (ECB) as it considers cutting rates this week.

The eurozone’s Composite Purchasing Managers’ Index (PMI), a key indicator of private sector activity, stayed unchanged at 50.2 in February, indicating a fragile recovery. Services activity, which has been the cornerstone of the eurozone economy, has lost momentum. Inflationary pressures remain persistently high, with firms increasing their prices at the fastest rate in ten months due to higher input costs.

Although France’s private sector remains in contraction territory, Germany’s activity expanded marginally. Southern European countries, such as Spain and Italy, displayed resilience however, with Spain’s Services PMI and Italy’s services sector showing stronger growth.

The ECB’s decision to cut interest rates is complicated by these stubborn inflationary pressures. Market reaction to the subdued PMI figures was mixed, with the euro strengthening and European stocks rebounding sharply.

Source: https://www.euronews.com/business/2025/03/05/eurozone-private-sector-sees-fragile-growth-as-inflation-stays-high