Surprisingly strong growth in services led the recovery of business activity in the eurozone to pick up steam in February, with the S&P Global flash Composite Purchasing Managers’ Index (PMI) rising to a nine-month high of 52.3, much higher than expected. This suggests that the economic outlook across Europe may be less grim than predicted. Germany, the largest economy in the eurozone, reported an unexpected bounce in activity, as well as declining price pressures, with its PMI showing growth for the first time in eight months. France also reported a similar picture, with activity growing for the first time since October. The eurozone PMI showed that demand was increasing for the first time since mid-2022, and businesses were adding to their headcount. The optimism for the year ahead also improved in February, with the business expectations index reaching a nine-month high. Although manufacturing activity declined, an index measuring output rose to 50.4, its first time above 50 since May. Input costs were barely rising, and factories were charging lower prices than before. These signs of easing price pressures are likely to be welcomed by European Central Bank policymakers, who have been raising borrowing costs in an attempt to rein in inflation.