Euro Area: Business activity returns to growth in January

Euro Area PMI January 2023

Euro Area: Business activity returns to growth in January

The flash Eurozone Composite Purchasing Managers Index (PMI) rose to 50.2 in January from 49.3 in December. Consequently, the index moved above the 50 no-change threshold, signaling an improvement in business conditions compared to the prior month.

Januarys increase was led by a rebound in the services sector as well as a less-pronounced contraction in manufacturing activity. New orders fell at a softer rate, while business confidence strengthened. On the price front, input inflation fell thanks to easing supply constraints. However, output inflation accelerated amid strong cost growth and intensifying wage pressures.

Commenting on the release, Chris Williamson, chief business economist at S&P Global Market Intelligence, stated:

“The survey suggests that a nadir was reached back in October, since when fears over the energy market in particular have been alleviated by falling prices, helped by the warmer than usual weather and generous government assistance.”

Meanwhile, Bert Colijn, senior economist at ING, said:

“For the ECB, this is once again a tricky report card. Falling inflationary pressures are good news, but stubbornly high selling prices and a strong labour market performance will cause alarm bells to ring in Frankfurt. For next weeks governing council meeting, this means that the ECB is likely to stay the course and hike by another 50 basis points.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 0.6% in 2023, which is unchanged from last months forecast. For 2024, panelists see fixed investment increasing 2.2%.

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