Against a backdrop of economic weakness in the euro zone, there were tentative signs of improvement at the start of the year, as contractions in activity and new orders were less severe and growth expectations strengthened. After April 2023, employment is firm and export demand declines at its slowest pace.
index HCOB Composite PMI of Eurozone Aggregate Activity 47.9 (47.6 in December), marking its six-month high, while Services PMI stood at 48.4 (48.8 in December), marking its three-month low. Business confidence at its strongest level in nine months; Inflationary pressures intensify. Although the index was below an unchanged level of 50.0, indicating lower business activity in the euro zone, it recorded the smallest decline since July 2023, according to S&P Global's report for HCOB.
“Continued inflationary pressures are evident, particularly in prices charged for goods and services. Sales and purchase prices rose at their highest rate in eight months. A slower contraction in the manufacturing sector led to a weak decline in overall levels of aggregate activity in January, offsetting a slightly faster decline in services sector activity,” the report released today said. refers to
“However, country-level data revealed significant variation in regional economic behavior. Southern Economies Eurozone countries saw improvement in economic activity levels in early 2024. Although small, Developments in Spain and Italy They are strongest at six and eight months respectively. In contrast, abbreviations in Germany and France worsened, and the composite gross activity index fell in both countries (but remained above its minimum recorded in 2023)”, he continues.
The survey also reveals that new orders received fell due to weak demand, but the decline was weaker than in previous months, which helped stabilize employment. For another month, growth expectations improved despite more pressure on prices in the euro zone. rates Inflation of buying prices and selling prices They rose to an eight-month high on sharp price hikes in the services sector.
The HCOB PMI services sector business activity index fell to 48.4 in January from 48.8 in December and price pressures were pronounced in the services sector: inflation rates for both prices paid and prices collected accelerated in January to their fastest levels in four and seven months. respectively.
North and South: The Recession of Spain and Italy
Cyrus de la Rubia, HCOB's chief economist, notes in a commentary accompanying the report: “A The North-South Division in the Eurozone Services Sector, but maybe not in the way you expect. Contrary to the common view that southern European countries are the weakest link in the monetary union, these economies are currently doing relatively well. This positive trend acts as a countervailing force and partially mitigates the decline recorded in Germany and France. Thanks Resilience shown by Italy and SpainThe services BMI index saw only a slight decline to 48.4, close to the 50″ expansion zone.
“Infinity European Central Bank While lowering interest rates, it becomes more clear (…), the ECB is reluctant to make monetary policy more flexible as the purchase prices and sales prices of goods in the service sector increase. However, it is in a complex situation, which is emphasized by the latest official GDP data for the fourth quarter of 2023, which indicates that the economy is avoiding a technical recession,” it continued.
Labor shortages in the eurozone are a widespread reality, underlined by significant wage increases in the four main eurozone countries. Input price inflation in these economies amplifies the impact of this phenomenon. “Surprisingly, companies have shown a significant reluctance to cut their workforce, even in Germany and France, where the service sector is in poor shape. Business expectations have improved somewhat. Better times are coming. However, new orders fell for the seventh month in a row. Immediate recovery is not possible“.
