How the tables have turned between UK and eurozone economies: a chart

A role reversal between the UK and eurozone economies in February.

With the exception of the aftermath of the Brexit vote in July, the eurozone’s lead over the UK in purchasing managers indices has climbed to its highest level in nearly six years.

While both sectors remain above the 50 mark that represents growth, the UK’s composite PMI reading fell to a five-month low in February (53.8) while the eurozone enjoyed its best month since April 2011 (56).

The 2.2 points difference in favour of the eurozone is the biggest since May 2011 with the UK’s PMI performance having traditionally been far above that of its single currency counterparts since 2012 (see chart above).

IHS Markit’s monthly PMI survey measures output, hiring and expectations across the private sector and provides a good early indicator of official GDP numbers.

February’s shift comes as the UK’s robust recovery, already long in the tooth since 2011, moderates while the eurozone’s stuttering performance since its debt crisis is finally picking up momentum at the start of the year.

Since the Brexit vote, the PMI surveys have revealed rising inflationary pressures on UK firms driven by the fall in sterling. This has raised businesses import price costs and forced them to pass on higher costs to consumers.

Eurozone inflation has also accelerated on the back of climbing energy prices this year but the effects of higher prices will be felt unevenly between the two economies, according to Christian Schulz, economist at Citi.

“Rising inflation in 2017 will hit the UK more than continental Europe”, said Mr Schulz. “Inflation will rise more in the UK due to weak sterling and the UK relies more on consumer spending for growth.”

Meanwhile, Markit’s indicators suggest the eurozone’s quarterly GDP growth is on course for a 0.6 per cent expansion at the start of the year, hitting an annualised rate of around 2.5 per cent.

After years of false starts, the bloc is finally beginning to “fire on all cylinders”.