Investing.com - Economic activity in the euro zone fell to the lowest level in more than a year in February and deflationary pressures intensified, adding to concerns over the health of the region's economy, preliminary data showed on Monday.
In a report, market research group Markit said that its Flash Euro Zone Composite Output Index, which measures the combined output of both the manufacturing and service sectors dropped from 53.6 in January to 53.0 in February, a 13-month low and below forecasts for 53.3.
The preliminary euro zone manufacturing purchasing managers’ index fell to a seasonally adjusted 53.0 this month, the lowest in 12 months and down from a final reading of 53.6 in January. Analysts had expected the index to dip to 53.3 in February.
Meanwhile, the flash services purchasing managers’ index declined to a 13-month low of 51.0 this month from 53.2 in January, missing expectations for a reading of 52.0.
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
Manufacturing output showed the smallest increase since December 2014, moving closer to stagnation amid a further faltering in growth of new orders and exports. Services fared better, though nevertheless saw growth weaken to the slowest since January of last year.
Moreover, a sharp deterioration in optimism about future activity growth in the services sector points to further weakness in coming months.
Deflationary pressures meanwhile intensified. Average prices charged by companies for their goods and services fell at the steepest rate for a year as firms competed to boost sales.
Commenting on the report, Chris Williamson, Chief Economist at Markit said, “Disappointing PMI survey data for February greatly increase the odds of more aggressive stimulus from the ECB in March.”
“Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified. Economic growth is likely to slow below 0.3% in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely,” he added.
EUR/USD was trading at 1.1090 from around 1.1087 ahead of the release of the data, while EUR/GBP was at 0.7832 from 0.7820 earlier.
Meanwhile, European stock markets were higher after the open. The EURO STOXX 50 rose 1.8%, Germany's DAX added 1.6%, France’s CAC 40 tacked on 1.45%, while London’s FTSE 100 inched up 1.2%.