European economy
A survey showed, on Wednesday, that the decline in corporate activity in the euro zone slowed this month, but the improvement in the outlook for the manufacturing sector was offset by a sharp decline in the services sector that dominates the region.
The Standard & Poor’s Global Purchasing Managers’ Index rose to 47.9 points this month from 47.6 in December, which is slightly lower than the results of a Reuters poll that expected the index to reach the level of 48 points, but it remained below the level of 50 points that separate growth from contraction for the eighth month. .
Christoph Weil of Commerzbank said: “Today’s data confirms our view that the economic weakness in the euro area will continue for a longer period than expected by the majority of economists and the European Central Bank.”
According to a recent Reuters poll, the union’s economy is expected to grow by 0.1 percent this quarter.
Germany and France, the EU’s largest economies, saw an improvement in their manufacturing PMIs, but a deterioration in their services indicators.
British services companies also saw another rebound in growth this month, adding to signs of a modest recovery in a sluggish economy, although struggling factories are now taking a hit from the inflationary impact of tensions in the Red Sea.
The Houthi attacks in the Red Sea disrupted shipping movement, and the delivery times index decreased, leading to a significant decline in the purchasing managers’ index for factories in the euro zone, which was below 50 for the first time in a year.
The European Union faces the risk of higher consumer prices and slower growth due to these disruptions, although it has not yet felt an economic impact, a senior European Union official said on Tuesday.
Inflation
There was evidence of inflation rising again with higher input and output price indices.
The production price index rose to 54.2 from 53.8, its highest level since May last year.
This is likely to disappoint European Central Bank policymakers who are keen to bring inflation back to their 2 percent target.
“Inflationary pressures remain very high. This will be a concern for ECB policymakers, who are particularly focused on services inflation as a measure of domestic price pressures,” said Bradley Saunders of Capital Economics.
The services PMI fell to a three-month low of 48.4 from 48.8 in December, missing expectations in a Reuters poll for a rise to 49.0.
However, optimism about next year improved and the business expectations index jumped to 59.8 from 58.3, the last rise in May.
2024-01-24 10:37:15
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