The IHS Markit Eurozone PMI Composite Output Index edged lower in January, falling for a fifth successive month to register its lowest level for five-and-a-half years.
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After accounting for seasonal factors, the index recorded 51.0 in January, a little better than the earlier flash estimate of 50.7 but still down from 51.1 in December and signalling only weak growth in business activity.
Activity weakness was principally centered on France and Italy.
Output in France was down for a second successive month, and at the fastest rate in over four years.
Meanwhile, Italian private sector output deteriorated for the third time in four months and to the greatest degree in over five years.
Manufacturing was the primary source of output weakness during January.
Whilst service sector growth was unchanged since December at around a four-year low, production in manufacturing rose only slightly and at the weakest rate in over fiveand-a-half years of growth.
Output growth in manufacturing was only sustained via the depletion of backlogs and stockpiling of finished goods (which rose at a series record rate).
Indeed, manufacturing new work declined to the greatest degree since April 2013 and was a primary reason for the first fall in composite new business for over four years.
New work received by service providers was barely changed, rising only negligibly since December.
Job numbers continued to increase during January, maintaining a run of growth that begin in November 2014.
Moreover, job creation was sustained across the single currency area, with the exception of Italy where a net fall in jobs was recorded for the first time since September 2015.
Moreover, in line with the wider slowdown in activity and new work, overall euro area employment growth was the weakest in 28 months at the start of 2019.
Increased capacity nonetheless helped to support the clearance of unfinished business.
Backlogs of work declined for a second successive month in January and to the greatest degree recorded by the survey since the end of 2014.
Meanwhile, input prices continued to rise markedly in January.
Wage and salary pressures drove operating expenses up in the service sector, but with price pressures easing in manufacturing (thanks to lower oil-related goods prices) overall input costs rose to the weakest degree in nearly a year-and-a-half.
Increased costs nonetheless led to another increase in output charges, which rose in January at the strongest rate in three months.
Business confidence also improved to its highest in three months, though nonetheless remained subdued and around the lowest in four years.
International trade tensions, Brexit and ongoing political tensions – both regionally and globally – continued to undermine sentiment. ■