EUROZONE

by Chris Anderson

Flash PMI data for January forecasts the Eurozone manufacturing PMI at 48.8, versus 47.8 for December, with the corresponding manufacturing production index at 49.0 versus 47.8 for December. These numbers were, in fact, verified. All eight major European economies saw an increase in PMI (to a 5-month high.) A marginal rise in business activity suggests a tentative return to growth after six months of decline. Business confidence jumped higher, with order books showing reduced rates of contraction. The composite PMImanufacturing and services - was up for the third consecutive month, from 49.3 in December to 50.2 in January. There was a pick up in employment, and firms are preparing for a year ahead better than previously expected.

There is an air of optimism presently in the Eurozone manufacturing - and services - sector. The order books show reduced rates of contraction, while input cost inflation cooled further thanks to alleviation of supply chain stress, but the average selling price inflation for both goods and services went slightly higher. It is boiling down to the first expansion in business activity since last June.

Manufacturing production contracted modestly, showing the smallest drop in factory production since last June. This optimistic sentiment was apparent in both manufacturing and services, across France, Germany, and the rest of the Eurozone as a whole. This good news led to additional hiring. Supply chain pressures eased, energy prices fell, the weather was warmer than usual, and governments chipped in with assistance.

While all the data seem to be “teetering on the edge” the overall news is encouraging. A renewed slide into contraction should not be ruled out as borrowing costs rise, but the survey brings welcome good news to suggest that any downturn is likely to be far less severe than previously feared and that a recession may well be avoided altogether.

Car registrations in Western Europe came in at 10.15 million for the year 2022, with sales for the year down 4.1% compared to 2021. Registrations for 2022 were up 16.5% year- over-year. n