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Eurozone economy failed to pick up

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Christian Fernsby ▼ | January 27, 2020
Eurozone growth remains muted Flash PMI data for January indicated that the eurozone economy failed to pick up growth momentum at the start of 2020.
European factory
Business in Europe   The rate of expansion has remained broadly stable
Business activity increased at the same slight pace as was seen in the final month of 2019 as the rate of expansion in new orders remained muted.

Topics: Eurozone economy

Underlying data showed that growth of services activity eased slightly, while the manufacturing sector moved closer to stabilisation.

Combined growth of the ‘big-2’ eurozone economies picked up, but this was offset by near-stagnation across the rest of the single-currency area.

The ‘flash’ IHS Markit Eurozone Composite PMI was unchanged at 50.9 in January, signalling a further muted increase in activity across the euro area economy.

The rate of expansion has remained broadly stable since the start of the final quarter of 2019, running at the weakest for around six-and-ahalf years.

The overall expansion in business activity was again centred on the service sector.

That said, services activity rose at a slightly weaker pace than in December.

Meanwhile, manufacturing production remained in contraction, but the rate of decline eased to the softest in five months.

The ongoing muted pace of output growth reflected a lack of momentum in new order inflows.

New business increased for the second month running in January, but the rate of expansion remained marginal.

There were signs of manufacturing new orders nearing stabilisation at the start of the year, with the rate of decline in new work easing to the softest since November 2018.

This was also the case with regards to manufacturing new export business.* While rates of growth in output and new orders remained muted at the start of the year, companies were increasingly confident regarding the yearahead outlook for activity.

Business sentiment rose to a 16-month high, largely thanks to a fifth successive improvement in confidence among manufacturers amid signs that the worst of the recent downturn has passed.

Confidence in the outlook for output encouraged companies to take on additional staff in January.

The rate of job creation quickened from that seen at the end of 2019, but remained muted amid further job cuts at manufacturers.

Rises in operating capacity enabled companies to deplete backlogs of work again at the start of 2020.


 

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