Eurozone Private Sector Sees Growth for the First Time Since June

It was a busy start to the European session. Industrial production and Eurozone private sector PMI numbers were in focus. Going into the European session, French industrial production figures for December beat expectations, rising by 1.1% versus a forecasted 0.2% increase. However, production slowed from 2.0% in November.

While the numbers drew interest, service PMI numbers from Spain and Italy and finalized PMIs from France, Germany, and the Eurozone had more influence.

The Spanish services PMI increased from 51.6 to 52.7, with Italy’s services PMI up from 49.9 to 51.2. Economists forecast PMIs of 52.5 and 51.0, respectively.

Finalized numbers for France, Germany, and the Eurozone supported the ECB’s economic outlook and monetary policy goals.

While the French Services PMI fell from 49.5 to 49.4 versus a prelim 49.2, Germany’s services PMI rose from 49.2 to 50.7 versus a prelim 50.4.

Euro Area Private Sector Returns to Growth

As a result, the euro area services PMI increased from 49.8 to 50.8 versus a prelim 50.7.

Following the latest member state PMIs, the euro area Composite PMI rose from 49.3 to 50.3, up from a prelim 50.2.

According to the finalized euro area Composite survey,

• The private sector returned to expansion for the first time in seven months.
• Service sector activity fueled the private sector recovery, with production volumes continuing to fall in January.
• Weak demand continued to weigh, with total new orders falling for the seventh consecutive month.
• New factory orders were a drag while demand for euro area services steadied.
• The rate of job creation hit a three-month high, improving across both sectors despite the continued fall in factory orders.
• Input cost inflation eased to its weakest since April 2021, while output price inflation rose modestly.
• Optimism across the private sector hit a nine-month high but was still well below pre-Ukraine war levels.

By country, Ireland ranked first, with a composite PMI of 52.0, while France sat at the bottom of the table, with a composite PMI of 49.1.

EUR/USD Price Action in Response to Euro Area Composite PMI

Ahead of today’s PMIs, the EUR/USD rose to an early high of $1.09116 before falling to a pre-PMI low of $1.08820.

However, in response to the PMI numbers, the EUR/USD rose to a post-stat high of $1.09075 before easing back.

At the time of writing, the EUR was down 0.07% to $1.09024.

Up Next

Wholesale inflation figures for the Eurozone are due out shortly. Economists forecast the annual wholesale inflation rate to soften from 27.1% to 22.5% in December. Barring an unexpected spike, investors will likely brush aside the numbers, with the ECB set to lift rates by another 50 basis points in March.

Investors also need to consider ECB member speeches. However, no members are due to speak today, leaving chatter with the media to influence. It is unlikely that ECB President Lagarde will discuss the euro area economy or monetary policy at an International Holocaust Remembrance Day commemoration event today.

Later today, US economic indicators will move the dial. It is a busy day on the US economic calendar. The US Jobs Report for January will be the key driver today. Following better-than-expected jobless claims figures from Thursday, a marked increase in nonfarm payrolls and better-than-expected wage growth would drive dollar demand.

Economists forecast average hourly earnings to rise by 4.3% year-over-year versus 4.6% in December and for nonfarm payrolls to increase by 185k.

The ISM Non-Manufacturing PMI and sub-components will also influence. Beyond the headline figure, investors need to consider employment, new orders, and price sub-components.