(Bloomberg) -- Business activity in the euro area hardly grew again in February, reinforcing fears that the bloc remains mired in stagnation.
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The Composite Purchasing Managers’ Index by S&P Global held at 50.2, just above the 50 threshold separating expansion from contraction. Analysts had predicted a reading of 50.5.
“The somewhat milder recession in the manufacturing sector is only just being overcompensated for by the barely noticeable growth in the services sector,” Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said Friday in a statement, adding that the figures don’t point to a recovery.
The euro held an earlier drop, trading about 0.2% lower at $1.0476, as investors added to bets on European Central Bank interest-rate reductions. Money markets are now pricing 78 basis points of easing this year compared with 74 basis points on Thursday. Bonds held gains, with the German 10-year yield three basis points lower at 2.50%.
European growth has been hobbled by a manufacturing malaise, political turmoil in its two biggest member-states and heightened uncertainty from the war in Ukraine to persistent threats of US trade tariffs The latest jolt came from President Donald Trump and his administration as they signaled much weaker support for European defense in the future, necessitating much higher military outlays by the continent itself.
What Bloomberg Economics Says...
“The PMI survey for February suggests the hit to the euro-area economy from the rise in uncertainty created by Trump’s tariff threats has been modest. However, the coast is still far from clear as the details of his proposed measures remain hazy. In any case, putting trade policy aside, the expansion of the economy has been lackluster for some time and it could still benefit from further monetary easing.”
—David Powell, senior euro-area economist. Click here for full REACT
The euro area’s PMI has been fluctuating around 50 since June, with a series of ECB cuts since last June helping prevent a downturn. Long-awaited rebounds in consumer demand and corporate spending, however, have failed to materialize, even as inflation looks set to return to 2% this year.
Germany has begun to perform a little better ahead of Sunday’s snap ballot, where it’s hoped that the likely next chancellor, conservative Friedrich Merz, will cut red tape and reinvigorate investment. Its composite PMI beat analyst expectations to reach 51.