The eurozone's private sector is expanding at its fastest pace in seven months, surveys indicated on Friday, although companies continue to cut prices, suggesting low inflation remains a challenge for policymakers. But the jump in business activity, led mainly by services, will provide a glimmer of hope for the European Central Bank, which is struggling to steer the monetary union towards stronger growth that may eventually generate higher prices.
The latest data come just days ahead of the ECB's first foray into outright purchases of sovereign bonds and as European finance ministers are set to meet once again to come up with an agreement that keeps Greece in the euro zone. Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 53.5, its best since July, beating even the highest forecast in a Reuters poll of economists.
Germany and France fared better than they had in previous months as well, although most of the recovery was led by service companies benefiting from a weakening euro and slightly higher disposable incomes as a result of cheaper energy. Robust growth among services helped Germany's private sector and business activity in France unexpectedly expanded at the fastest rate in 3 1/2 years this month. "The PMI data does provide some reassurance that activity has picked up in spite of the troubles in Greece and Ukraine," said Jessica Hinds, European economist at Capital Economics. "That said, it's still consistent with slow quarterly growth - 0.3 percent in the first quarter, which is the same as Q4 - and that suggests the economy is still struggling to gain momentum."
Companies kept cutting prices to drum up new business, the surveys showed. But new orders led the rise in activity in February, and the price cuts were not as deep as those seen in recent months. That reflects improvement in producers' pricing power and a rebound in oil prices. Separate official data on Friday showed Italian industrial orders jumped 4.5 percent month-on-month in December, the biggest rise in 11 months.
Markit said estimates for GDP growth for the euro zone and Germany could go up if March produces similar data. However, uncertainty remains in financial markets over whether Greece, struggling with its debts, and its lenders will come through with a timely agreement.
Euro zone finance ministers will meet later on Friday to break a deadlock over Greece's need for further financing. Athens has submitted a new request to extend its loan agreement, but some - particularly Germany - thought it glossed over past commitments to austerity and reforms. A survey later on Friday, also from Markit, is expected to show manufacturing growth cooling slightly this month in the United States. The Federal Reserve has been on a divergent path from other major central banks, which have either cut rates or resorted to quantitative easing to thwart disinflation caused by a collapse in the price of crude oil and other commodities.
But minutes of the Fed's last meeting published this week showed many members wanted to keep interest rates near zero for longer, casting doubt on the timing of the first rate increase in the world's largest economy, still expected in June.