Eurozone PMI Services was finalized at 48.4 in January, down slightly from December’s 48.8. PMI Composite was finalized at 47.9, up from prior month’s 47.6, a 6-month high.
The data reveals a striking “north-south divide”, challenging conventional perceptions. Spain and Italy, with Composite PMIs of 51.5 and 50.7 respectively, outperform their northern peers, Germany (47.0) and France (44.6).
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that ECB caution regarding interest rate cuts is justified by the rising price indices, reflecting increasing input and output prices in the services sector. This inflationary pressure complicates ECB’s decisions, especially in light of the latest GDP data for Q4 2023, which showed the eurozone narrowly avoiding a technical recession.
The persistent eurozone-wide labor shortage, leading to wage increases and input price inflation, especially in the top economies, indicates a cautious approach to workforce reductions, even in weaker service sectors of Germany and France.
