The Markit Eurozone PMI® Composite Output Index moved into positive territory for the first time in five months in January, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. The index rose for the third month running, up from 48.3 in December to a five-month high of 50.4. That signalled a marginal increase in private sector economic activity.
Output rose at a robust pace in Germany, which saw the largest increase for seven months, and a modest expansion (the first growth for four months) was also reported in France. In contrast, output continued to fall across the rest of the region as a whole, dropping for the eighth successive month. However, the rate of contraction was the weakest for four months.
Eurozone service sector activity rose very slightly, expanding for the first time since last August. Meanwhile, manufacturing output was unchanged, improving on the declines reported by the goods-producing sector throughout the previous five months.
Incoming new business continued to fall in both sectors, although the rates of decline eased to a five-month low in services and a six-month low in manufacturing. Goods producers also reported the smallest drop in new export orders for six months. Measured across both sectors, new business fell for the sixth month in a row, but at the slowest rate since last August.
With inflows of new orders continuing to deteriorate, backlogs of work fell across the region for the seventh successive month, declining in both manufacturing and services. The overall fall was the smallest for four months, but nonetheless sufficient to lead firms to cut employment for the first time since April 2010 (albeit only marginally). The decline in jobs was driven by services, as manufacturing headcounts rose slightly on average.
Employment growth slowed to the weakest since June 2010 in Germany, and to near-stagnation in France. Across the rest of the region, the average rate of job losses was broadly unchanged from the near two-year record seen in December.