The eurozone economy is showing signs of recovery in early 2024, a survey showed, citing heightened inflationary pressures, supporting the European Central Bank’s view that interest rates will remain at record highs for some time to come.
The purchasing managers’ index (PMI) for the bloc, compiled by S&P Global and considered a good indicator of overall economic health, rose to 47.9 in January from 47.6 in December, confirming the previous estimate. This is the best result since July, but remains below the 50-point mark that separates growth from decline.
Monday’s survey also showed that commodity prices rose faster last month, and while an index measuring demand rose, it still remained at levels below the break-even point.
The producer price index rose to an 8-month high of 54.2 points from 53.8 points previously.
“The PMI survey data justifies the concern of the European Central Bank to cut interest rates,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Late last month, the ECB left key interest rates at record highs and reaffirmed its commitment to fighting inflation.
The PMI in the dominant services sector fell to 48.4 in January from 48.8 in December, in line with the survey’s initial estimate.
However, optimism for the new year among companies in the services sector is at an eight-month high, and companies added the number of employees at the fastest pace since September.
The index measuring employment rose to 51.2 points from 50.8 points.
