Preliminary data show the eurozone economy is on course for a modest recovery at the start of the year, according to survey results published on Monday, which indicated an increase in inflationary pressures, DPA and Reuters reported, citing Agerpres.

The composite purchasing managers’ index (PMI) in the euro zone, calculated by S&P Global and considered a good indicator of the health of the economy, rose to 47.9 in January from 47.6 in the previous month, but below the threshold of 50 points. that separates growth from contraction in the economy. However, this is the highest level since July 2023.

The study shows a rapid increase in production costs in January, but also in demand. The producer price index rose in January to 54.2 points from 53.8 points in the previous month, reaching the highest level in the last eight months.

“The ECB’s reluctance to cut interest rates is now easier to understand if you take PMI data into account. Against the backdrop of rising prices in the services sector, the ECB is reluctant to ease monetary policy,” said Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank.

The PMI, which covers the eurozone’s dominant services sector, fell to 48.4 in January from 48.8 in the previous month. However, companies in this industry expect conditions to improve in 2024 and are hiring. The employment index rose to 51.2 points in January from 50.8 points in the previous month.

Recovery still ‘moderate’

Other data, released separately, showed that investor confidence in the eurozone improved for the fourth straight month, hitting a ten-month high in February.

The Sentix index for the euro area rose to minus 12.9 points in February from minus 15.8 points in January, while analysts had expected minus 15 points. This is the highest level since April 2023. Sentix data includes responses from 1,306 investors. The research was conducted on February 1-3.

However, Sentix data shows that the recovery process remains at a reduced level due to the difficult situation in Germany. The recovery can be assessed as “moderate”, stated the authors of the study.

The sub-index of future expectations in the euro area rose to minus 5.5 points in February from minus 8.8 points in January, the highest level in the last two years.

In Germany, investor confidence fell to minus 27.1 points in February from minus 26.1 points in January, while the sub-index of future expectations rose to minus 14 points in February from minus 16.3 points in January.

“Contrary to the general opinion that the countries of Southern Europe are the weak link of the Eurozone, the economies of these countries are currently registering good changes,” says Cyrus de la Rubia.