The euro area private sector economy grew for a seventh consecutive month in January, according to the flash Markit Eurozone PMI®, with the rate of growth accelerating to the fastest since June 2011. The headline PMI (which tracks output across both manufacturing and services) rose from 52.1 in December to 53.2.


Growth picked up in Germany and the rate of decline eased in France, while the rest of the region also saw a strengthening upturn.


New orders across the euro area rose for a sixth successive month, albeit growing at a rate unchanged on December. Backlogs of work also continued to fall marginally, suggesting that the level of demand, although rising, remains insufficiently strong to enable companies to build up a pipeline of orders to fall back on if demand weakens.


Employment was consequently trimmed slightly again, having stabilised in December, as companies remained uncertain about expanding capacity. Employment has not risen since December 2011, though the trend in the rate of job losses has eased considerably over the past year.

Selling prices also continued to fall, highlighting the fragility of demand, and have now declined continually over the past two-and-a-half years. The latest reduction was only modest, however, and the weakest since May 2012. The easing in the rate of decline reflected in part the need to pass higher costs on to customers. Meanwhile, the rate of input cost inflation picked up compared with December but was slightly below November’s recent peak.

Manufacturing continued to lead the recovery, expanding at a robust pace in January. Output, new orders and new export orders all showed the largest monthly rises since April 2011, each growing for a seventh successive month. The improvement in demand encouraged goods producers to take on more staff for the first time since the start of 2012. Although only modest, the increase in employment was the best seen since September 2011.

Service sector companies saw a more moderate increase in activity than manufacturers, but nevertheless reported that activity grew at the second-fastest rate since June 2011 (the latest improvement exceeded only by the rise recorded in September). Moreover, expectations about the year ahead held steady at a two-and-a-half year high.

However, an easing in growth of services new business suggests that any expansion of activity in February may remain weak. Slower new business growth was also a contributory factor behind firms cutting their workforce numbers again, reversing a marginal rise in December (which had been the first increase since December 2011).

Wide national divergences also persisted, with strong and accelerating growth in Germany contrasting with an ongoing downturn in France, although the latter did see an easing in the rate of decline.

Growth in Germany hit the highest since June 2011. The strong pace of expansion was fuelled by a seventh consecutive monthly rise in new business. Manufacturing output surged at the strongest pace since April 2011, but services activity growth picked up only marginally on December. Employment in Germany rose only modestly as a result, the rate of job creation sliding compared with December. Staffing levels have nonetheless now risen in each of the past three months.

In France, output fell for a third successive month, through the rate of decline eased to the slowest seen over this period. Rates of decline eased in both manufacturing and services. New orders likewise fell at a reduced rate, but the pace of job losses accelerated slightly.

Output growth in the rest of the region (excluding France and Germany) picked up to the highest since February 2011, with growth recorded for a sixth month running. The rate of job losses meanwhile eased to the weakest in the current 32-month sequence, with employment falling only very marginally in January.


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