Euro zone services PMI downwardly revised to 48.8

The final figure of euro zone February services PMI showed a downward revision compared with the first estimate. Euro zone services PMI was downwardly revised from 49.4 to 48.8, compared with a reading for 50.4 in January. Euro zone services PMI is now again at the December level, after returning temporary back to growth in January. National details show steep contractions in Spain (41.9 from 46.1) and Italy (44.1 from 44.8) and also the French reading was downwardly revised (to 50.0 from 50.3). The German services PMI was slightly upwardly revised (from 52.6 to 52.8) and also Irish services PMI rebounded sharply in February (53.3 from 48.3). The details show that new business continued to contract and at a slightly faster rate than suggested by the flash estimate, while business expectations improved to the highest level since July last year. Employment contracted for a second straight month. While the headline figure was a clear disappointment, the details are more mixed, especially the business expectations index raises hopes that the fall back is only temporary.

Euro zone retail sales picked unexpectedly up at the start of the new year. In January, retail sales rebounded by 0.3% M/M, while the consensus was looking for a fifth consecutive decline. The December outcome was however downwardly revised from -0.4% M/M to -0.5% M/M. The details show that sales of both food & drinks (0.6% M/M) and non-food products (0.5% M/M) rose at the start of the new year. The national data show that strength was based in France (2.1% M/M) and Luxembourg (2.0% M/M), while retail sales dropped in Germany (-1.6% M/M), Ireland (-1.2% M/M), Portugal (-2.7% M/M), Belgium (-0.2% M/M) and Austria (-0.1% M/M). Not all national data were yet available. The slight improvement in retail sales at the start of the new year is an encouraging sign and bodes well for growth at the start of the new year. The breakdown is however more mixed as strength was mainly based in France.