Euro Zone Remains In Contraction

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Euro Zone Remains In Contraction

Euro Zone Remains In Contraction During January

The businesses from the Eurozone are off to a tough start, as January's reading shows a contraction. As per the data, the PMI reading remained in the contraction phase amid high geopolitical tension.

The reading for January 2024 showed that the PMI reading had recovered slightly. However, the reading is still in the contraction phase, which is not a good sign. In addition, the services industry from the Eurozone is also harmful, which suggests weak economic progress during the month.

Pmi Reading For January Was 47.9

The PMI reading jumped from the earlier month's reading of 47.6 to around 47.9 (+0.2 change). According to the economists, a reading of 48.0 was expected, but the data has disappointed again.

Overall, that's the 8th month of consistent contraction shown by the PMI index. The Eurozone's economic activities have remained subdued for eight consecutive months.

According to Commerzbank, the recent data shows a consistent economic weakness in the Eurozone that will likely linger for a long time. They added that it will last much longer than the forecasts made by the ECB & other economists.

dive deeper into the data shows that the manufacturing PMI of France & Germany showed a slight improvement. On the contrary, the services sector of both countries showed a decline.

Furthermore, the demand & supply imbalance is also rising due to the recent incidents on the global trade routes. This means there's a good chance that the prices will increase again in the EU block. As a result, the growth will take a hit, translating into lower PMI readings in the future.

The bottom line is that the EU has started the new year (2024) on a lower note as the manufacturing and services sectors are struggling. Adding the fact that interest rates will remain high despite the upcoming rate cuts makes things even more gloomy.

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