Eurozone January final services PMI 48.4 vs 48.4 prelim

<ul><li>Prior 48.8</li><li>Composite PMI 47.9 vs 47.9 prelim</li><li>Prior 47.6</li></ul><p>The readings match up with the initial estimates as the Eurozone economy continues to contract to start the new year. Overall, business activity and new orders softened but growth expectations strengthened in January. However, inflation remains stubborn and persistent and that is arguably the bigger takeaway at the moment. That considering it will hinder the ECB's process of dialing back on higher interest rates. HCOB notes that:</p><p>“There is a north-south divide in the eurozone’s service sector, but perhaps not in the way you may expect. Contrary to the
general view that southern European countries are the weak link of the currency union, these economies are presently
performing relatively well. This positive trend serves as a counterforce, partially mitigating declines in Germany and France.
Thanks to the resilience exhibited by Italy and Spain, the PMI for services experienced only a marginal dip to 48.4,
maintaining proximity to the expansionary threshold of 50.
</p><p>“The European Central Bank's hesitancy to cut interest rates gains clarity when considering the surge in the PMI price
indices. With both input and output prices in the services sector on the rise, the ECB is reluctant to ease monetary policy.
However, it finds itself in a tricky situation. This is accentuated by the latest official GDP data for the fourth quarter of 2023,
indicating that the economy narrowly avoided a technical recession.
</p><p>“A shortage of labour is a pervasive reality across the entire eurozone, evident in the noteworthy wage increases in the top
four euro area countries. Inflation of input prices within these economies underscores the impact of this phenomenon.
Remarkably, companies demonstrated a marked unwillingness to reduce their workforces, a trend observed even in
Germany and France, where the service sector remains in poor condition.
</p><p>“Business expectations have improved a bit, hinting at better times ahead. However, given the fall of new business for seven
months straight, an imminent recovery is unlikely.”</p>

This article was written by Justin Low at www.forexlive.com.