THE downturn in eurozone business activity eased this month, but an improvement in the manufacturing outlook was partly offset by a steeper decline in the bloc’s dominant services industry, a survey showed on Wednesday (Jan 24).

Hamburg Commercial Bank’s (HCOB) preliminary composite purchasing manager’s index (PMI), compiled by S&P Global, rose to 47.9 this month from December’s 47.6. This was just shy of expectations in a Reuters poll for 48, and marked its eighth month below the 50 level separating growth from contraction.

“The commencement of the year brings positive tidings for the eurozone, as manufacturing experiences a widespread easing of the downward trajectory witnessed in the past year,” said Cyrus de la Rubia, chief economist at HCOB.

“In the domain of services, the contraction in output is currently moderate, echoing the trends observed in the fourth quarter of the previous year,” he added.

There was evidence of inflation creeping back up, with both input and output price indices rising. The output prices index rose to 54.2 from 53.8, its highest since May last year.

That will likely disappoint policymakers at the European Central Bank (ECB), who are keen to get inflation back to their 2 per cent target.

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“In the ongoing discourse surrounding the optimal timing of rate cuts by the ECB, the PMI price indicators align with the sentiments of the hawks,” de la Rubia said.

The services PMI fell to a three-month low of 48.4 from December’s 48.8, confounding expectations in a Reuters poll for an uptick to 49.

However, optimism about the year ahead improved, and the business expectations index jumped to 59.8 from 58.3. It was last higher in May.

Manufacturing activity, which the PMI suggests has been contracting since July 2022, declined again in January – albeit at a shallower pace. The headline reading bounced to 46.6 from 44.4, well ahead of the poll estimate for 44.8.

An index measuring output that feeds into the composite PMI also rose to 46.6 from 44.4.

While factories reduced headcount again, they did so at a shallower pace, indicating a trough may have passed. The employment index rose to 47 from 46.7. REUTERS