By Paul Hannon

The eurozone's modest economic recovery gained some fresh momentum in February, despite heightened uncertainty about future policies ahead of a series of key elections across the currency area.

IHS Markit Tuesday said its composite Purchasing Managers Index for the eurozone's manufacturers and service providers, which is based on a survey of 5,000 companies, rose to 56.0 in February from 54.3 in January, reaching its highest level since April 2011. The jump was unexpected, with economists surveyed by The Wall Street Journal last week having forecast a slight drop in the measure. A reading above 50.0 signals an increase in activity, while a reading below signals a decline.

The pickup seems set to continue over coming months, as new orders flowed in at the fastest pace in six years, while businesses hired additional workers at a rate not seen since before the financial crisis, in August 2007.

"The eurozone economy moved up a gear in February," said Chris Williamson, IHS Markit's chief business economist. "With inflows of new orders also surging and firms becoming even more optimistic about the year ahead, growth could even lift higher in coming months."

Mr. Williamson said that in the past, a composite PMI at the February level was correlated with quarter-to-quarter economic growth of 0.6%. If that were to be the outcome for the first quarter, it would mark an acceleration from the 0.4% rate of expansion recorded in each of the third and fourth quarters of 2016.

Germany and France--the eurozone's two largest members--both recorded significant pickups during the month. The composite PMI for France reached its highest level since May 2011, a sign the economy continues a recent revival as presidential elections near.

The leading candidates have built their programs around a rejection of incumbent President François Hollande's economic policies after years of weak growth and high unemployment.

The front-runner, pro-business and pro-European centrist Emmanuel Macron, has indicated he would concentrate on loosening labor laws to tackle unemployment. National Front leader Marine Le Pen, who polls show losing to Mr. Macron in the second round May 6, has a more radical plan: Pull France out of the euro and abandon the constraints of EU fiscal discipline. The conservative candidate François Fillon says he would implement a deep austerity program coupled with tax cuts for business and tax increases for consumers.

But uncertainty about which of these diverse programs will be implemented doesn't appear to have daunted French businesses, and the same appears to be true of other countries that face key votes later this year, including Germany.

The surveys of purchasing managers also found that businesses raised their prices at the fastest pace since July 2011, a boost for the ECB as its struggles to lift inflation toward its target of just under 2% after almost four years of falling short.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

February 21, 2017 05:14 ET (10:14 GMT)

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