Euro zone business growth loses momentum

Euro zone business growth has slowed more than expected this month but remains robust as higher prices and a stronger currency take a toll, yet firms are the most optimistic in at least 5-1/2 years, a survey showed.

The euro zone emerged as one of the best-performing major economies last year, and its businesses started 2018 by ramping up activity at the fastest rate in well over a decade.

But February's preliminary Purchasing Managers' Index (PMI) implied the blistering growth pace set in January, the fastest in well over a decade, has lost some momentum.

IHS Markit's composite flash PMI for the euro zone, seen as a good guide to economic health, fell to 57.5 this month, below all forecasts in a Reuters poll that had predicted a more modest dip to 58.5 from January's final reading of 58.8.

“We have been saying for a while it would be amazing if it could maintain such elevated levels, so some pullback was not altogether unsurprising. It is still a very elevated level,” said Chris Williamson, chief business economist at IHS Markit.

Earlier data from Germany and France, the bloc's two biggest economies and the only ones that publish flash PMIs, showed business growth eased.

Williamson said that the bloc was heading towards its best quarter since the second quarter of 2016 and that the PMI pointed to growth in the three months to the end of March of 0.9 percent, much faster than the 0.6 percent predicted in a Reuters poll.

Firms shared his optimism - an index measuring where they think output will be in a year's time climbed to 68.3 from 68.0, its highest since IHS Markit started collecting the data in July 2012.