LONDON, Jan 24 (Reuters) – Eurozone business activity made a surprise return to modest growth in January, adding to signs that the bloc’s slump may not be as deep as feared and that the currency union could escape the recession, a survey showed.
S&P Global’s Composite Purchasing Managers’ Index (PMI), seen as a good gauge of overall economic health, rose to 50.2 this month from 49.3 in December.
January was the first time the index was above the 50 mark that separates growth from contraction since June, and the reading was ahead of the average Reuters poll forecast of 49.8.
“The rise in purchasing managers’ indices is likely to fuel the hopes of many that the economy in the eurozone can escape a recession after all,” said Christoph Weil at Commerzbank.
However, Weil added that a clear deterioration in the economic environment continued to point to at least a mild recession.
A mild winter so far, falling gas prices and recent positive economic data saw some quarterly growth forecasts in a Reuters poll published on Monday improve, although a technical recession was still forecast.
Pressure on Germany’s economy, Europe’s largest, eased further in January as inflation slowed and businesses looked to the new year with optimism, a sister survey showed, although sentiment was still shy of predicting a return to growth. .
In France, the bloc’s second-largest economy, manufacturing fell slightly overall again in January, its PMI showed, but manufacturing activity improved for the first time since August.
British private sector economic activity, however, fell at its fastest pace in two years in January, another PMI showed, as businesses blamed high Bank of England interest rates, strikes and weak consumer demand for the slowdown. .
The dollar fell near a nine-month low against the euro on Tuesday as markets continued this year’s buoyancy following PMI data and a rise in corporate earnings.
In a sign that they are growing more optimistic, firms in the euro zone increased the number of employees at a faster pace this month. The employment index rose to a three-month high of 52.5 from 51.9 in December.
The PMI covering the bloc’s dominant services index also surprised higher, hitting a six-month high of 50.7. It was 49.8 in December and a Reuters poll had forecast 50.2.
Despite consumers facing huge bills, demand eased slightly. The new business index was just shy of the breaking point at 49.8, from 48.4.
Factory activity also showed an improvement, but again fell. The manufacturing PMI rose to 48.8 this month from 47.8, ahead of a Reuters poll forecast of 48.5.
An index that measures output feeding into the composite PMI rose to a seven-month high of 49.0 from 47.8.
As in the services PMI, the input price index fell, but firms raised their tariffs at a faster pace. The producer price reading edged up to 61.4 from 61.2, but was still well below what it has averaged over most of the past three years.
“PMIs suggest price pressures remain strong. So there is no prospect of the ECB lifting the reins anytime soon,” said Andrew Kenningham at Capital Economics.
As it continues its battle against still high inflation, the European Central Bank will raise interest rates by 50 basis points at each of its next two meetings, according to a Reuters poll.
Although the eurozone’s central bank has raised rates at its fastest pace in history, it has so far failed to bring inflation close to its 2% target.
Reporting by Jonathan Cable Editing by Susan Fenton
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