The flash Markit Eurozone PMI fell from 53.6 in January to 52.7, the lowest since January of last year. The second consecutive monthly slowing in the rate of output expansion reflected a waning in growth of new orders for a third successive month, resulting in the smallest rise in new business for 12 months.

Backlogs of work were broadly unchanged as a result of the weaker increase in new work. With outstanding business stagnant, firms limited their hiring of new staff, leading to the weakest net increase in employment for five months.

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.Average input costs fell marginally for a second successive month, the first back-to-back monthly decline since the spring of 2013.

Manufacturing prices fell especially sharply, with purchase costs dropping to the greatest extent since July 2009 on the back of low global commodity prices and intense competition among suppliers. Suppliers’ delivery times, a key gauge of capacity utilisation, pointed to the weakest supply chain pressures since July 2013. Factory gate prices showed the largest monthly fall since June 2013.

Input costs in the service sector continued to rise but prices charged fell at a slightly sharper (though relatively modest) rate, reflecting stiff competition and weak demand. The divergence points to squeezed margins.

France saw a return to contraction as business activity fell (albeit marginally) for the first time since January of last year, declining in both manufacturing and services. New orders also fell and employment once again barely rose.

In contrast, Germany saw output growth hold up relatively well, albeit with the pace of expansion hitting a seven-month low as a solid rise in service sector activity was countered by the weakest rise in manufacturing output since November 2014. Job creation slowed to a ten-month low. The rest of the single currency area saw business activity rise at the weakest rate since February of last year.

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