European business activity improved slightly but showed a continued contraction as Covid-19 social restrictions drag on. Euro zone is still struggling with the coronavirus pandemic, with most countries restricting people’s movements to contain the number of infections. At the same time, the vaccination rollout is still far from where European leaders would like to see it amid red tape, production and supply issues. IHS Markit’s flash composite PMI for the euro zone, which looks at activity across both manufacturing and services, rose slightly. Ongoing Covid-19 lockdown measures dealt a further blow to the eurozone’s service sector. The European Central Bank estimated that the euro area’s GDP in 2021 will climb by 3.9%. However, the forecast is highly dependent on the evolution of the pandemic and there are fears that variants of the virus could derail economic growth even further if the vaccines prove less effective for new strains.
In France, business activity saw the fastest decline in three months during February. The country has not introduced a full third lockdown, fearing the population will not fully comply with it, but other tough measures are in place such a curfew. Its flash composite PMI came in at 45.2, from 47.7. In Germany, the flash composite PMI hit 51.3 in February, a two-month high. The latest data showed a further contrast between the services and the manufacturing sector. Whereas services activity dropped to a nine-month low, manufacturing output rose to a 36-month high. Ongoing weakness in services, where large parts of the sector remain either closed or disrupted by virus containment measures, continues to be counterbalanced by strong, export-driven growth across manufacturing.