Eurozone January flash services PMI 50.7 vs 50.2 expected | Forexlive

  • Prior 49.8
  • Manufacturing PMI 48.8 vs 48.5 expected
  • Prior 47.8
  • Composite PMI 50.2 vs 49.8 expected
  • Prior 49.3

The euro area economy creeps back into growth territory to start the new year but it is marginal at best, as economic activity runs into stagnation after a couple of months of decline. It is taking pretty much the best of both worlds from France and Germany’s earlier readings, as recession fears ease a little. S&P Global notes that:

“A steadying of the eurozone economy at the start of the
years adds to evidence that the region might escape
recession. 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. At the same time, supply chain
stress has eased, benefitting producers most notably in
Germany, and more recently the reopening of the
Chinese economy has helped to restore confidence in the
broader global economic outlook for 2023, propelling
business optimism sharply higher.

“The region is by no means out of the woods yet,
however, as demand continues to fall – merely dropping
at a reduced rate – and an upturn in the rate of inflation of
selling prices for both goods and services will add
encouragement to the hawks to push for further monetary
policy tightening. The case for higher interest rates is
fuelled further by the upturn in employment growth
recorded during the month and signs of higher wages
driving the latest upturn in price pressures.

“A case for policy caution is supported by the survey
merely indicating a stagnation of the eurozone economy,
hinting that a renewed slide into contraction should not be
ruled out as borrowing costs rise, but the survey
undoubtedly brings welcome good news to suggest that
any downturn is likely to be far less severe than
previously feared and that a recession may well be
avoided altogether.”

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