Eurozone Manufacturing Activity Surges to 69-Month High in January

Rising employment, strong manufacturing activity and elevated levels of business optimism underpinned a robust level of expansion in the Eurozone's economy in January, a survey published on Tuesday has shown.

The Eurozone manufacturing purchasing managers' index, a composite index compiled by research company IHS Markit and based on a weighted combination of survey variables, surged to a 69-month high, with a reading of 55.1, up from 54.9 in December. Readings above 50 indicate expansion, while those below indicate contraction.

Markit's Eurozone purchasing managers' index (PMI), a weighted average of the manufacturing output index and Markit's services business activity index, registered a reading of 54.3 in January, down slightly from 54.4 in December but nevertheless marking one if the highest readings seen over the past five-and-a-half years.

Elevated levels of optimism were seen in both services and manufacturing, though only the latter saw expectations about future growth improve further in January. The start of the year also saw the largest monthly rise in employment since February 2008.

Chris Williamson, chief business economist at IHS Markit, said: "The eurozone economy has started 2017 on a strong note. The January flash PMI is signalling respectable quarterly GDP[gross domestic product] growth of 0.4% with a broad-based expansion across both manufacturing and services."

But he added that there were also lingering concerns: "It's not all good news: with costs rising steeply due to higher commodity prices and the weak euro, while selling price growth remains subdued, margins are being squeezed to the greatest extent for over five years." Williamson did note, however, that a recent strengthening of demand had been starting to help restore some pricing power among suppliers, saying that this could hint at an upturn in core inflationary pressures.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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