Business sentiment in the euro area continued to improve in January. For the first time in six months, it points to economic growth again. The purchasing managers’ index from S&P Global rose by 0.9 points to 50.2 points compared to the previous month, as the market researchers announced on Tuesday in London. Analysts had expected an average of 49.8 points. With a little more than 50 points, the indicator is back in the range that indicates economic growth. In the previous months, the indicator had signaled a contraction due to the consequences of the Ukraine war.
Both the index for the industry and for the service sector brightened. However, the development was different in the two largest economies in the euro zone: while in Germany the industrial mood deteriorated and the service provider mood improved, the development in France was the opposite.
“The fact that the economy in the euro zone continued to stabilize at the beginning of the year indicates that the region could avoid a recession,” commented S&P chief economist Chris Williamson. Other leading indicators had also brightened in recent months and recession worries were diminishing somewhat Because of the energy crisis caused by the war, there were considerable fears in the summer that Europe’s economy could go through a severe recession.
Economy not off the hook yet
Williamson explains that things will probably not get that bad with the recent decline in energy prices and the very generous state aid. “At the same time, the delivery problems have subsided, from which the manufacturers in Germany in particular benefit.” China’s departure from the once strict corona policy, which had caused considerable economic upheaval in world trade, also caused optimism.
Bank economists also commented with confidence in principle, but also found words of warning. Thomas Gitzel, chief economist at VP Bank, spoke of a good start to the new year. “However, the European economy is not yet off the hook.” Last but not least, the effects of the sharp interest rate hikes that the central banks have taken to counter the high inflation are not yet being felt in full. “This is precisely why there is a recession despite improved economic prospects not off the table yet.” (dpa)