According to the flash report from HCOB, business activity in the private sector of the eurozone unexpectedly expanded in January, reaching a 5-month high, which led to a near-stabilization of employment. Meanwhile, input costs rose sharply, with the rate of inflation hitting a 21- month high. Companies also increased their selling prices at a sharper pace.
The eurozone composite PMI output index rose in January to 50.2 points from 49.6 points in December. An index value above 50 points indicates an expansion of activity in the sector. Economists had expected growth to 49.7 points. The services PMI fell to 51.4 from 51.6 in December, while the manufacturing PMI rose to 46.1 points (8-month high) from 45.1 points. Economists had expected the services PMI to drop to 51.5 and the manufacturing PMI to rise to 45.3 points.
HCOB said that new orders in the private sector fell again in December (the 8th month in a row), but the smallest degree since August last year. Meanwhile, new export orders also fell, and the rate of decline remained solid despite easing to a six-month low. The data also showed that employment declined for the sixth consecutive month, but only marginally. Companies lowered outstanding business at a solid pace, but the rate of depletion eased to an eight-month low.
As for the inflationary situation, input prices increased at the sharpest pace since April 2023. The rise in input prices was also faster than the series average. Output prices also rose further in January, recording the sharpest increase in 5 months. Business confidence was broadly stable in January, with companies remaining optimistic that output will increase over the coming year. Sentiment was still weaker than the series average, however.