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Euro zone business growth picks up

Growth in euro zone business activity hit a seven-month high in February, following a pick-up in demand, according to a closely-watched survey released on Friday.

The flash composite reading of Markit's purchasing managers' index (PMI) came in at 53.5 this month, up from January's 52.6 and above analyst forecasts. The composite measure includes activity in both the manufacturing and services sectors; a reading over 50 marks expansion, whereas one below indicates contraction.

A factory in Laupheim, Germany
Martin Leissl | Bloomberg | Getty Images

"Growth of business activity has now accelerated for three successive months, having almost stalled back in November, driven higher by stronger demand," Markit said in its release. "New orders also grew at the sharpest rate for seven months in February."

The services sector drove February's growth in business activity, with manufacturing expansion remaining relatively subdued.

The region-wide figure got a boost from two of the currency bloc's biggest economies.

Germany's composite reading ticked up in February, to 54.3 points from 53.5 points in January.

The reading for France, where economic growth has lagged that of its euro zone neighbors in recent months, also came in better than expected. Its composite PMI rose to 52.2 - the highest reading in three and a half years, and up from 49.3 in January.

Howard Archer, chief European economist at IHS Global Insight, described the figures as "genuinely encouraging."

"There are mounting signs that euro zone economic activity really is now improving, which reinforces our frequently stated belief that growth will surprise on the upside in 2015," he wrote in a note.

In the fourth quarter of 2014, economic growth in the region beat expectations but remained anemic, with the economy expanding by 0.3 percent.

Deflation fears weigh

Chris Williamson, chief economist at Markit, said the European Central Bank's bond-buying program - which he described as a "bazooka" - had directly boosted business optimism in the region.

The European Central Bank's (ECB) Governing Council announced the launch of a controversial government-bond-buying program, a policy known as quantitative easing, at its January meeting. One of the main aims of the scheme is to drag the euro zone out of growth-sapping deflation and back towards the ECB's "just under 2 percent" target. Prices in the region fell by 0.6 percent year-on-year in January, after sliding into deflation for the time since 2009 in December.

However, separate figures published Friday revealed that German producer prices fell further in January, leading to increased fears that the region is heading towards a deflationary spiral.

- By CNBC's Katrina Bishop

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