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
(purchasing managers' index) 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. Meanwhile 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.
Ireland stayed atop the PMI all-sector output growth league table in January,
with its rate of expansion among the best registered in the past seven years
(albeit slower than in December). The German and Spanish economies also
strengthened, with output rising at the fastest rates since June 2011 and July
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.
Ireland recorded the strongest expansion in business activity of all the
nations covered, despite seeing growth cool slightly from December’s near
seven-year record. 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.
Chris Williamson, chief economist at Markit said: "The final reading of the Eurozone PMI
was down slightly on the earlier flash reading but nevertheless signals a very
encouraging start to the year. Companies are reporting the strongest growth of
business activity for two-and-a-half years, putting the economy on course to
grow by 0.5% in the first quarter if this pace is sustained.
"We should expect GDP forecasts for 2014 to start being revised up if the PMI
continues to rise, with the consensus of 1.0% growth already looking somewhat
"The upturn is also feeding though to the labour market: employment has
stabilised over the past two months, bringing an end to the continual culling of
staffing levels seen since the start of 2012. Hopefully we will now soon see
companies start to generate new jobs in significant enough numbers to bring down
the region’s unemployment rate in coming months, which will perhaps represent
the true start of the economic recovery for many people.
"While Germany is providing the main impetus to the recovery due to its sheer
size, the upturn is becoming broad-based, which in turns adds to the likelihood
that it can be sustained. Spain and Ireland are now seeing robust growth,
undergoing their strongest phases of expansion since 2007, while Italy is also
returning to growth and France’s business sector is also showing signs of
"The main concern is that the recovery is still all-too dependent on the
manufacturing sector. Although the service sector has returned to growth, its
weak pace of expansion reflects still-subdued domestic demand – especially from
consumers – in many Eurozone countries, notably France and Italy. A revival in
consumer sentiment in these countries will be an important
ingredient of a more robust upturn."
The Eurozone Composite PMI (purchasing managers' index) is produced by
Markit and is based on original survey data collected from a representative
panel of around 5,000 manufacturing and services firms. National manufacturing
data are included for Germany, France, Italy, Spain, the Netherlands, Austria,
the Republic of Ireland and Greece. National services data are included for
Germany, France, Italy, Spain and the Republic of Ireland.
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