Eurozone: Economy starts the year on a high note
January 24, 2018
Leading data suggests that the Euro area’s economy began the new year on a positive note. The preliminary Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, came in at a nearly 12-year high of 58.6 in January, up from December’s 58.1. The result overshot market analysts’ expectations of a dip in the index to 57.9. The composite PMI lies well above the 50-threshold, signaling expanding business activity in the Eurozone.
Activity is booming across the economy. The services PMI hit an over 10-year high in January, and the manufacturing PMI also remained strong, although it edged down from December’s reading. Strong inflows of new business were seen in January, stretching firms’ capacity. Backlogs of work also grew at one of the highest rates seen over the past decade. The positive momentum also spilled over into the labor market, as firms added jobs at the fastest rate since September 2000. Healthy demand led firms to hike selling prices, while input cost inflation rose on higher oil prices.
Regarding the two largest Eurozone economies, the composite PMI for France edged up, and the indicator is pointing to the best growth spell since 2011. Conditions were also solid in Germany, although the composite PMI fell slightly. Elsewhere in the region, business activity grew at the best pace since July 2006.
Eurozone GDP Forecast
FocusEconomics Consensus Forecast panelists expect the Eurozone economy to expand 2.1% in 2018, which is unchanged from last month’s forecast. For 2019, panelists expect the economy to grow 1.8%.