Growth of Eurozone private sector business activity accelerated to a nine-month high in January. The Final Eurozone Composite Output Index rose to 57.0, up from 55.5 in December. Incoming  new orders, meanwhile, rose to the greatest extent since August 2007. In both cases, rates of expansion were above the earlier flash estimates.


The recovery remained two-speed, however, as Germany and France continued to lead the rest of the pack by some distance. Business activity in Germany rose at the second-fastest rate in the survey history, with near record increases in both the manufacturing and service sectors. Growth also accelerated in France, to a four-month high, as a faster expansion in services activity offset slower growth at manufacturers. Germany saw a series record increase in new business, while new order growth in France remained solid despite easing over the month. Growth was broad-based across manufacturing and
services in both cases.

There were also signs of improved vigour from the periphery. Growth in Ireland was the sharpest since August 2007, while the rate of expansion in Italy picked up slightly from December’s three-month low. Even the stagnation seen in Spain was an improvement on the contractions seen in the preceding four months.  However, the improvements seen in the periphery were mainly confined to the manufacturing sector, indicating that domestic demand conditions remained a key factor underlying national growth differentials.

Employment rose for the ninth successive month in January, with jobs growth registered in both the manufacturing and service sectors. However, the rate of increase eased further from November’s 33-month high as stronger job creation in manufacturing was offset by a slowdown in services to a three-month low.

January data provided a mixed picture regarding inflationary pressures. Average input costs rose at the sharpest rate since August 2008, led by a survey record increase in manufacturing purchase prices. Service sector cost inflation also accelerated again, reaching a 27-month high. Although average prices  charged for goods and services rose for the sixth successive month, the extent of the pass-through of higher costs to clients
remained only moderate. Manufacturers’ selling prices rose at the fastest rate in two-and-a-half years, but this was partly offset by a slight decrease in service sector charges. All of the national manufacturing sectors covered by the survey reported higher factory gate prices. In contrast, only Germany, France and Italy reported higher service sector charges. 


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