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Eurozone Private Sector Logs Moderate Growth

eurozoneservices july 24jan20 lt

The euro area private sector grew at the same moderate pace as seen in the final month of 2019, reflecting muted pace of new order growth, flash survey data from IHS Markit showed Friday.

The composite output index held steady at 50.9 in January, indicating a further muted increase in activity across the currency bloc. The score was expected to rise to 51.1. However, a reading above 50 indicates expansion in the sector.

The unchanged reading for the composite PMI in January leaves it still consistent with fairly slow GDP growth, Jack Allen-Reynolds, an economist at Capital Economics, said. The economy is likely to continue to grow at a meager pace in 2020.

The services Purchasing Managers' Index fell to 52.2 from 52.8 in the previous month. This was also below the forecast of 53.0.

Meanwhile, the manufacturing PMI rose to 47.8 in January from 46.3 a month ago. The reading was expected to climb moderately to 46.8. Nonetheless, the sector remained in negative zone.

While rates of growth in output and new orders remained muted, companies were increasingly confident regarding the year ahead outlook for activity as sentiment rose to a 16-month high. Further, the rate of job creation quickened from that seen at the end of 2019.

On the inflation front, the survey showed that the rate of input cost inflation quickened to an eight-month high. In turn, companies raised their selling prices which was broadly in line with those seen through the second half of 2019.

The survey showed that the combined growth of the 'big-2' eurozone economies picked up, but this was offset by near-stagnation across the rest of the single-currency area.

"Overall, a stable picture for both growth and inflation will likely reassure the European Central Bank that they are safe to keep monetary policy fixed for now while carrying out a strategy review," Andrew Harker, an associate director at IHS Markit, said.

Germany's private sector gained momentum in January as services activity grew at the fastest pace in five months amid a slower decline in manufacturing.

The flash composite output index rose more-than-expected to 51.1 in January from 50.2 in December. This was the highest score in five months and above the forecast of 50.5.

The services PMI hit a five-month high of 54.2 versus 52.9 in the previous month. The reading was forecast to rise marginally to 53.0.

Although the manufacturing PMI rose to an 11-month high of 45.2 in January from 43.7 a month ago, the reading was well below the neutral 50. Economists had forecast a reading of 44.5.

Elsewhere, France's private sector grew at the slowest pace in four months in January. The flash composite output index fell to 51.5 in January from 52.0 in December. The reading was forecast to remain unchanged at 52.0.

Although service providers continued to outperform manufacturers, the former saw activity growth ease to the weakest in four months.

The services PMI came in at 51.7, down from 52.4 a month ago and below the forecast of 52.2.

Meanwhile, the manufacturing PMI rose more-than-expected to 51.0 from 50.4 in December. The expected reading was 50.6.

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