Euro zone businesses perform better than expected in February as manufacturing bounces back, PMI shows

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Euro zone businesses perform better than expected in February

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Germany leads the expansion with growth at four-month high

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British businesses report another strong month

(Adds detail in paragraphs 6, 9-10; comment in paragraphs 7-8)

By Jonathan Cable

LONDON, Feb 20 (Reuters) - Euro zone business activity accelerated faster ?than forecast this month as manufacturing swung back to ?growth for the first time since October, though the dominant services sector marginally underperformed expectations, a survey showed.

The HCOB Flash Eurozone ?Composite PMI, compiled by S&P Global and released on Friday, rose to 51.9 in February ?from 51.3 in January, marking the 14th consecutive month of expansion and ?exceeding expectations in a ?Reuters poll of a more modest rise to 51.5.

PMI readings above 50.0 indicate growth in activity with those below reflecting ?contraction.

The headline manufacturing PMI jumped to 50.8 ?from 49.5 while the output index, which feeds into the composite reading, bounced to a six-month high of 52.1 from 50.5.

February's rebound was driven by a ?resurgence in demand with the factory new ?orders index climbing ?to 50.9 from 49.2.

GERMANY LEADS EURO ZONE GROWTH, UK REBOUNDING

In Germany, Europe's largest economy, business activity hit a four-month high, although in France the private sector ?showed little sign of growth amid weak demand, their PMIs showed.

"February's flash PMIs support ?the view that activity in the euro zone economy is growing at a reasonable pace, led by a pick-up in Germany," said Andrew Kenningham at Capital Economics.

"While the relationship between the Composite PMI and GDP growth in the euro zone has been weak over the past three ?years, this ?suggests at face value that the economy is continuing to expand at ?a moderate pace," he added.

Services activity in the common currency area showed a modest improvement ?with the PMI nudging up to 51.8 from 51.6. The Reuters poll had predicted a slightly bigger uptick to 51.9.

Overall pricing pressures nudged up. But firms increased charges at a more modest pace, giving scant reason to revise expectations that the European Central Bank will hold interest rates steady for at least the rest of this year.

Meanwhile, Britain, outside the euro zone and the European Union, saw businesses ?extend their early 2026 rebound into a second month, its PMI showed.

British retail sales volumes rose in January at the fastest annual pace in nearly four years, according to official data, suggesting ?consumers are now happier to spend ?after a weak end to 2025 for the economy. (Reporting by Jonathan ?Cable; Editing by Joe Bavier)