London
CNN
—
Business activity across the 20 euro countries expanded in January for the first time in six months, according to data released on Tuesday, providing new evidence the European economy could take a toll. confusion for expectations and avoid recession This year.
An initial reading on the eurozone Purchasing Management Indexwhich tracks activity in the manufacturing and services sectors, rose to 50.2 in January from 49.3 in December, showing its first expansion since June. A reading above 50 represents a contraction. growth.
The return to modest growth has been helped by energy prices fall and ease tension in the supply chain, helping to reduce incremental input costs for manufacturers.
This increase is accompanied by a strong improvement in optimism over the coming year, as recently reported reopening China’s economy after the lifting of Covid restrictions helped push confidence to its highest level since May last year. Growing optimism in Europe that Chinese consumers will start spending again is reflected in Swiss watchmaker Swatch
(SWGAF)Tuesday’s predictions for record sales for 2023.
Chris Williamson, chief economist at S&P Global Market Intelligence, which publishes a survey of executives at private companies, said: “The stable euro area economy at the start of the year is equal to Evidence suggests that the region can come out of recession.
However, Williamson added that a “new slide into contraction” should not be ruled out as a result of increased borrowing costs as a result of the European Central Bank’s rate hikes. But any recession “is likely to be much less severe than previously feared,” he said.
“Consumer confidence levels remain low and the late impact of the ECB rate hike still indicates that euro area GDP will a slight short-term drop before the rally can begin to take hold.”
Consumer sentiment in Germany, the region’s largest economy, looks set to improve for a fourth straight month in February from very low levels, according to a report. private survey published by GfK on Tuesday.
However, the picture looks much less promising in the UK, where January PMI . survey showed the sharpest drop in business activity since the nation’s Covid shutdown two years ago, as higher interest rates and low consumer confidence dampen activity in the service-dominated sector position.
The initial figure fell to 47.8 in January, from 49 in December, to maintain the contraction for the sixth straight month. The UK survey was conducted in conjunction with the Chartered Institute of Procurement & Supply.
“Weaker-than-expected PMI numbers for January suggest the risk of the UK slipping into a recession,” Williamson said. He added: “Industrial disputes, labor shortages, export losses, rising costs of living and higher interest rates all mean the pace of economic decline has accelerated again at the start of the year. “.
The UK economy lost more business days to strikes from June to November 2022 than in any six-month period in the previous 30 years, according to data released by the Office for National Statistics. UK announced last week.
Williamson said on Tuesday the data not only reflects short-term effects on growth, such as strike action, but also “ongoing damage to the economy due to long-term structural problems such as labor shortages, Brexit-related trade woes and movements.”
Despite a dismal start to the year, UK business expectations for next year hit an eight-month high, boosted by hopes for an improving global economic backdrop and cooling inflation. .
Separate data released by the ONS on Tuesday showed UK government borrowing hit £27.4 billion ($33.7 billion) in December, the highest figure for that month since records began. in 1993. This was fueled by a sharp increase in spending supporting household energy bills, as well as soaring interest payments on government debt.
