FX.co ★ Eurozone Private Sector Expands For First Time In Five Months

In January, the Eurozone's private sector experienced its first expansion in five months, driven by a deceleration in the decline of manufacturing output and moderated growth in the services sector, according to the latest data from S&P Global.

The HCOB Composite Output Index improved to 50.2 in January, matching the preliminary estimate, up from 49.6 in December. This marks the first monthly increase in private sector activity since the previous August.

The Services Purchasing Managers' Index (PMI) fell to 51.3 from December's 51.6, slightly below the preliminary value of 51.4. At the composite level, output increased despite a continuing eight-month decline in new business inflows, with export sales experiencing a significant decrease.

For the 22nd consecutive month, backlogged orders saw a reduction as both manufacturing and services sectors streamlined outstanding workloads. Employment numbers dipped slightly in January, with job losses occurring primarily in the manufacturing sector.

Business sentiment reached its highest level since July 2024, with manufacturers showing more confidence than their service sector counterparts for the first time in three years.

The survey highlighted intensifying cost pressures in January, as input cost inflation climbed to a 21-month peak. As a result, businesses raised their prices more aggressively.

National PMI figures identified Spain as the major driver for growth in the Eurozone, although the pace was slower compared to the end of 2024. Germany played a crucial role in the broader recovery, achieving its strongest monthly performance since last May. Conversely, Italy's economy remained nearly stagnant, while France experienced a fifth consecutive contraction.

Germany's private sector saw slight growth, propelled by robust performance in services and reduced manufacturing contraction. The HCOB final composite output index reached 50.5 in January, up from December's 48.0, aligning with the initial projection of 50.1.

The services PMI for Germany increased to 52.5 in January from 51.2, indicating the fastest growth in half a year, aligning with the initial estimates. Meanwhile, France's private sector noted its fifth consecutive contraction in January, with the final composite output index inching up to 47.6 from 47.5, falling short of the preliminary estimate of 48.3. Its services PMI dropped to 48.2 from 49.3 in December, initially estimated at 48.9.

Italy’s private sector remained marginally within the contraction zone in January, with the HCOB composite output index holding steady at 49.7. The services PMI slightly decreased to 50.4 from December's 50.7.

In Spain, private sector growth showed signs of slowing in January, largely due to a notable slowdown in manufacturing and weaker gains in the services sector. The composite output index registered 54.0, down from 56.8, while the services PMI decreased to 54.9 from 57.3 in December.