Eurozone PMI January 2016


Eurozone: Business activity in the Eurozone cools at the start of 2016

January 22, 2016

Activity in the Eurozone private sector saw a timid beginning at the beginning of 2016. The preliminary flash Eurozone Composite Purchasing Managers’ Index (PMI), elaborated by Markit, edged down from a revised 54.3 in December (previously reported: 54.0) to 53.5 in January. The result undershot the 54.2 the markets had expected, slipping to the lowest point in 11 months. According to Markit, “the Eurozone economy saw growth slacken to the weakest for almost a year in January, according the first business survey reports for 2016.”

The report showed that at the beginning of the year, growth in both the manufacturing and services sectors faltered to reach an 11-month low and a 12-month low, respectively in January. Meanwhile, as activity continues to grow, further order book growth in both sectors caused an increase of backlogs of uncompleted work, which prompted firms to continue boosting employment. Services created jobs at the same pace seen back in 2008 and the manufacturing sector maintained a robust rate of hiring. The survey also showed that businesses continued to benefit from lower prices, allowing firms to save on costs and cut prices charged to customers.

Regarding the two largest Eurozone economies, in January the Composite PMI fell in Germany to a three-month high while it grew modestly in France. The remainder of the region continued to enjoy strong business activity and job creation, although at a slower pace compared to the peaks seen last year.

In its December assessment of the economy, the European Central Bank (ECB) expects the Eurozone economy to increase 1.5% in 2015. For 2016, the ECB sees economic growth rising to 1.7% and picking up further to 1.9% in 2017. FocusEconomics Consensus Forecast panelists expect the Euro area economy to expand 1.7% in 2016, which is unchanged from last month’s forecast. For 2017, panelists expect the economy to expand 1.7%.

Author:, Senior Economist

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Eurozone PMI Chart

Euro PMI January 2016

Note: Markit Purchasing Managers’ Index (PMI) Composite Output. A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction
Source: Markit

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