Output in the eurozone economy expanded for the seventh successive month in January. At 52.9, up from 52.1 in December, the final Markit Eurozone PMI® Composite Output Index posted its highest reading since June 2011, but nudged lower from the flash estimate of 53.2.
The upturn was led by the manufacturing sector, where accelerated growth of both total new orders and new export business drove the rate of expansion in production to a near three-year record. The recovery in the service sector remained subdued in comparison, with business activity only rising at a modest pace – albeit a three-month high.
Slower growth in new business to service providers suggests that the expansion in output in this sector may remain weak in February. The German and Spanish economies strengthened, with output rising at the fastest rates since June 2011 and July 2007 respectively. Output in Italy edged back into expansion territory, an improvement on the growth hiatus seen in the prior two months. France remained alone among the big-four nations to report contraction in January. Although the rate of decline in overall output eased, contractions were nonetheless recorded in both the manufacturing and service sectors.
Eurozone employment was unchanged for the second month running in January. This was nonetheless an improvement on the sustained period of job losses recorded over the prior two years, and the marginal decline signalled by the earlier flash estimate for January. Job creation in Germany and renewed employment
growth in Spain was offset by further cuts in France and Italy, albeit at slower rates. Irish employment was flat over the month.
Inflationary pressures remained generally subdued in January. Average selling prices fell for the twenty-second month running, albeit to one of the least marked extents during that sequence, as demand remained fragile. Only Germany reported an increase. Meanwhile, the rate of inflation in average input costs remained well below its long run survey average.
The eurozone service sector expanded for the sixth successive month during January. At a three-month high of 51.6, up from 51.0 in December, the Eurozone Services Business Activity Index indicated a modest rate of output growth. Spain was the only nation to report an accelerated rate of increase, while Germany saw solid output growth but a slower pace of expansion. The downturns in France and Italy continued, but eased over the month.
The fragile nature of the recovery in the eurozone service sector was emphasised by the trends in new orders and backlogs of work. New business increased for the sixth month running in January, but the pace of expansion remained weak and eased since December. Two of the big-three nations – Germany and Italy – recorded only slight gains in new work while France saw a further outright decline. Ireland and Spain both registered solid growth in demand.
The generally subdued demand for services in the currency union meant that buffers of work-in-hand fell for the thirty-first month running, with declines signalled in each of the nations covered by the survey. Subsequently, employment levels fell for the third time in the past four months.
Job losses continued in France and Italy, while the pace of growth in German payroll numbers eased from December’s two-year high. Job creation remained solid in Ireland, while staffing levels in Spain edged above the stabilisation level for the first time in almost six years.
Average selling prices decreased for the twenty-sixth straight month in January, but at the slowest pace since May 2012. Although input costs continued to rise, the extent of the increase remained below the long-run survey average.
Companies’ outlook for output in one year’s time strengthened in January, hitting a two-and-a-half year record. However, optimism has now been below the long-run series average since mid-2011.
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