An official survey released on Wednesday indicated that manufacturing activity in the Eurozone shrank once again in February, but output rose for the first time since May as supply chains began to improve.
The final Purchasing Managers’ Index (PMI) for manufacturing from S&P Global fell to 48.5 in February from a January’s reading of 48.8, in line with the preliminary data, but remained below the 50 threshold separating expansion from contraction.
Nonetheless, an output index was slightly above breakeven at 50.1, up from 48.9 in January.
“A marginal expansion of output reported by Eurozone manufacturers in February is welcome news in representing the first increase since last May and a further improvement in the underlying trend from the low seen back in October,” said Chris Williamson, chief business economist at S&P Global.
He noted that the faster delivery of inputs into factories was the main reason for the better production picture, a trend that hadn’t been seen since 2009.
Goldman Sachs revised up its prediction for the European Central Bank’s next interest rate hike, expecting that the central bank would lift a rate by 50 basis points at the meeting in May. As a result, the terminal rate would peak at roughly 3.75% by June.