Recovery In Eurozone Private Sector Eases Fear Of Recession

Eurozone private sector moved into the expansion zone in January for the first time in seven months, raising hopes that the currency bloc would escape a recession, final survey results from S&P Global showed Friday.

At 50.3 in January, the composite output index climbed from 49.3 in December. The flash score was 50.2.

The renewed upturn in the private sector was exclusively fueled by services firms. Meanwhile, manufacturing activity logged a mild contraction.

The services Purchasing Managers’ Index, or PMI, advanced to 50.8 in January from 49.8 in December. The reading exceeded the crucial 50.0 mark that separates expansion from contraction for the first time since July 2022.

“It remains too early to completely disregard recession risks,” Chris Williamson, chief business economist at S&P Global Market Intelligence said. “In particular, the impact of higher interest rates on economic growth has yet to be fully felt.”

The European Central Bank raised its key interest rates by 50 basis points again this week, after softening its stance in December.

The S&P survey suggested that the overall economic growth across the currency bloc was constrained by continued weakness in demand. Firms also reported challenging export market conditions.

With rising business activity and a fall in new order intakes, companies made inroads into their backlogs. At the same time, the rate of job creation improved to a three-month peak as hiring activity strengthened across manufacturing and service sectors.

Input cost inflation slowed again in January to the weakest since April 2021. Meanwhile, there was a marginal rise in output charge inflation.

Further, firms were more optimistic about their future. The level of positive sentiment rose to a nine-month high.

Germany’s private sector activity moved closer to stabilization. The final composite output index came in at 49.9, up from 49.0 in December and the flash reading of 49.7. The services PMI registered 50.7 following December’s 49.2. The preliminary reading was 50.4.

The French private sector economy continued to contract in January. The final composite index posted 49.1, unchanged from December. The score was revised up from the flash 49.0. The service sector remained in a downturn. The corresponding index fell marginally to 49.4 from 49.5. The score was above the flash 49.2.

Reflecting concurrent gains in both manufacturing and services output, Italy’s private sector advanced to 51.2 from 49.6. The services PMI came in at 51.2 versus 49.9 in the previous month.

In Spain, there was a renewed expansion in the private sector output in January. The composite index rose to 51.6 from 49.9 a month ago. The services PMI posted at 52.7 in January, up from 51.6 in December.

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