LONDON (Reuters) – The euro zone economy is showing tentative signs of recovery at the start of the year, according to the HCOB composite PMI index compiled by S&P Global, which nevertheless signals a resumption of inflationary pressures.
The index rose from 47.6 in December to 47.9 in January, in line with its preliminary reading.
This is its best result since July, but it remains below the 50 mark which separates growth and contraction.
The indicator also shows that the rise in input and production costs accelerated in January, while demand remains in contraction. The producer price index rose from 53.8 to 54.2, its highest level in eight months.
“The hesitation of the European Central Bank to reduce interest rates is therefore becoming clearer,” notes Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank.
“With prices of inputs and output in the services sector rising, the ECB is reluctant to ease monetary policy.”
The PMI for the services sector rose from 48.8 in December to 48.4 in January, matching the “flash” estimate.
However, optimism among service businesses is at its highest level in eight months, with groups hiring at the fastest pace since September. The employment index rose from 50.8 to 51.2.
(Written by Jonathan Cable, Corentin Chappron, edited by Blandine Hénault)
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