European economy continues to recover in January
2023.01.24 09:15
European economy continues to recover in January
By Kristina Sobol
Budrigannews.com – A survey revealed that business activity in the Eurozone unexpectedly returned to modest growth in January, adding to indications that the bloc’s downturn may not be as severe as anticipated and that the currency union may escape recession.
Global S&P (NYSE:) The flash Composite Purchasing Managers’ Index (PMI), which is regarded as a reliable indicator of the state of the economy as a whole, increased to 50.2 in January from 49.3 in December.
The reading was higher than the median Reuters poll forecast of 49.8 in January, making it the first time since June that the index has been above the 50 level, which distinguishes growth from contraction.
According to Christoph Weil at Commerzbank (ETR:), “The rise in the purchasing managers’ indices is likely to fuel hopes among many that the economy in the euro area might just escape a recession after all.”
Weil added, however, that a distinct deterioration in the economic environment remained consistent with at least a moderate recession.
Even though a technical recession was still predicted, some quarterly growth forecasts in a Reuters poll published on Monday were upgraded as a result of a mild winter thus far, falling gas prices, and recent positive economic data.
A sister survey revealed that businesses were optimistic about the new year and inflation slowed, easing pressure on Germany’s largest economy in Europe. However, sentiment was still far from predicting a return to growth.
According to the PMI, France’s second-largest economy, manufacturing activity improved for the first time since August, despite a slight decline in overall output in January.
Another PMI showed that British private-sector economic activity fell at its fastest rate in two years in January. Businesses attributed the slowdown to strikes, higher Bank of England interest rates, and weak consumer demand.
After a slew of corporate earnings and PMI data on Tuesday, markets maintained their buoyant mood for the year, with the dollar hovering close to a nine-month low against the euro. MKTS/GLOB] This month, businesses in the euro zone increased their workforce at a faster rate, indicating that they are becoming more optimistic. From 51.9 in December, the employment index increased to a three-month high of 52.5.
The leading services PMI in the bloc also surprised to the upside, reaching a six-month high of 50.7. In December, it was 49.8, and the Reuters poll predicted 50.2.
Demand only slightly decreased despite consumers’ large bills. At 49.8, the new business index, up from 48.4, was just shy of the breakeven point.
Even though factory activity improved, it still decreased. This month, the manufacturing PMI exceeded the Reuters poll’s forecast of 48.5, rising to 48.8 from 47.8.
A measure of output that goes into the composite PMI rose from 47.8 to 49.0, a seven-month high.
The input prices index decreased similarly to the services PMI, but businesses increased their prices more quickly. Although the reading of output prices increased to 61.4 from 61.2, it was still significantly lower than the average over the majority of the previous three years.
“The PMIs suggest that there is still a lot of pressure on prices. According to Capital Economics’ Andrew Kenningham, “there is no prospect of the ECB taking its foot off the brake any time soon.”
According to a poll conducted by Reuters, the European Central Bank will raise interest rates by 50 basis points at each of its next two meetings as it continues its fight against still high inflation.
Despite the fact that the central bank of the euro zone has been raising interest rates at the fastest rate ever recorded, it has not yet achieved its inflation target of 2%.
