The eurozone composite Purchasing Managers' Index (PMI) remained steady at 50.2 in February, showing no change from the previous month. While the region's manufacturing output PMI saw a slight improvement, rising from 47.1 to 48.7, this merely indicates a slowing pace of decline rather than robust growth. The eurozone economy slipped back into stagnation at the end of 2024, with economic weakness predominantly affecting France, whereas Germany and other parts of the eurozone experienced expanding output.
Despite marginal signs of stabilization, new orders continue to decline, prompting businesses to reduce their workforce. The outlook remains uncertain, clouded further by potential threats from disruptive tariffs. Although the PMI suggests stabilizing economic activity, the ongoing reduction in hiring emphasizes a weak short-term outlook. Stock markets have displayed increased optimism about Europe recently, yet the economic indicators present a more nuanced picture.
The European Central Bank (ECB) appears confident that inflation is under control, yet cost pressures persist for businesses. This has led the ECB to maintain its strategy of lowering rates for the foreseeable future. The manufacturing output PMI, however, remains below the critical threshold of 50, indicating ongoing contraction within the sector.
Consumer confidence showed a slight uptick in February but continues to lag well below its long-term average. The eurozone economy is beginning to show signs of bottoming out, despite the sluggish pace of decline.
France has emerged as a focal point of economic softness within the eurozone, while Germany and other regions exhibit signs of recovery. The divergence highlights varying economic dynamics across the bloc and presents challenges for policymakers aiming for cohesive growth strategies.