The threat of deflation eased across the eurozone in February following a bounce back from heavy price discounting and steeply declining oil prices during the previous month. The 19-member currency bloc saw prices drop 0.3% last month compared with a drop of 0.6% in January, alleviating fears of an alarming deflationary spiral.
Unemployment also fell slightly to give Brussels a double dose of mildly positive economic news ahead of the European Central Bank’s meeting later this week in Cyprus, where it is expected to give further details of a €1.1tn stimulus programme.
The jobless rate dipped to 11.2% from 11.3% in January, continuing a slow but steady fall that began in late 2013. But apart from a recovery in the first half of 2011, the rate has been at or above 10% since late 2009.
Other data showed that the eurozone manufacturing sector remained lacklustre, with several countries lagging badly behind the rest, giving economists a reason to stay pessimistic about the prospects for a strong recovery in the next year.
Chris Williamson, chief economist at financial data provider Markit, said: “The eurozone manufacturing sector barely expanded in February, highlighting the malaise that still hangs over the region’s goods-producing economy as a whole. However, beneath the disappointing headline figure, different parts of the manufacturing economy are clearly moving at very different speeds, ranging from a [Irish] boom to a [French] slump.”
France suffered 10 months of contraction after shrinking at a faster pace in February, according to the Markit purchasing managers’ index (PMI) survey. The French manufacturing PMI fell to 47.6 last month from 49.2 in January. A reading above 50 indicates expansion.
The malaise that has struck French manufacturing industry has distracted from a strong recovery in Spain, where the factory sector posted its fifteenth month of growth. The monthly Spanish manufacturing PMI came in at 54.2, slightly down on January’s 54.7, but still showing a rise in activity. New export orders rose at the fastest pace in almost eight years.
Germany posted a modest PMI of 51.1, while Italy saw its factory sector grow for the first time in five months. The Italian manufacturing PMI jumped to 51.9, up from 49.9.