Eurozone prices rise at higher rate as 2024 starts: S&P GMI

The overall contraction of new orders in the zone was nevertheless the smallest recorded since last June, helping stabilise employment levels and lift business optimism about the year ahead to an eight-month high, Chris Williamson, chief business economist at the company, wrote on its website.

Manufacturing input costs continued to fall on an average.

The survey data, and in particular the price trends, are likely to encourage policymakers at the European Central Bank (ECB) to not rush into cutting interest rates, leaving S&P Global Market Intelligence to consider the prospects of the first cuts appearing only towards the middle or second half of the year.

With the latest available gross domestic product (GDP) data having estimated a 0.10-per cent contraction in the third quarter of 2023, the PMI points to a prolonging of this downturn into the new year.

The PMI, in fact, suggests that the eurozone's is enduring its deepest contraction since 2013 (if early pandemic months are excluded), albeit with recent months hinting at a bottoming out of the downturn, Williamson noted.

Although goods producers continued to lead the downturn, with manufacturing output falling for a tenth consecutive month in January, the fall in factory production was the smallest witnessed since last April. New orders for goods likewise showed the smallest decline for nine months.

January also saw the region's export decline easing, with overall new export orders dropping at the slowest rate for nine months thanks to reduced losses for both goods and services.

Eurozone manufacturers also cut their purchasing activity for a nineteenth successive month in response to lower production needs in the months ahead, resulting in a twelfth consecutive monthly fall in inventories of inputs. Inventories were also affected by delays in the supply of inputs, widely linked to shipping delays caused by disruptions in the Red Sea.

Business optimism in the zone about the next 12 months improved for a fourth successive month in January, rising to the highest since last May. Confidence struck a nine-month high in manufacturing.

ALCHEMPro News Desk (DS)