Eurozone January final manufacturing PMI 46.6 vs 46.6 prelim

<ul><li>Prior 44.4</li></ul><p>The headline reading is a 10-month high as it reaffirms that the downturn in Europe's manufacturing sector is easing. Of note, output and new orders are seen declining at their softest rates since April last year. Meanwhile, business confidence also improved to a 9-month high to start the new year. In more positive news for the ECB, input costs and output prices were seen dropping further despite the Red Sea situation. HCOB notes that:</p><p>“Let’s face it, there is a real chance that the manufacturing sector's year-long recession in the eurozone could stretch into the
first quarter of this year. Even though the PMI is higher than it was at the end of last year, it is still not hitting the expansion
mark. However, ECB president Christine Lagarde is playing it cautiously optimistic. During the January 25th press
conference, she said, "If we try to look at PMI numbers in particular (…), we are seeing some encouraging numbers.”
</p><p>“For those with a glass-half-full perspective, the set of manufacturing PMI indicators offers a dose of optimism. Firstly, the
headline PMI has marked three consecutive months of increase, a trend mirrored in the forward-looking indicator for new
orders. Secondly, there is a broad-based upward trend in sub-indicators, encompassing stock of purchases, backlogs of
work, and output. Plus, more companies than during the last nine months are expecting higher output in the coming year.
Despite these encouraging signs, a word of caution is in order, as both the headline index and the majority of sub-indices
persist within the contraction zone.
</p><p>“The eurozone's road to recovery in the manufacturing sector may see its kickoff in the southern economies, potentially
acting as a catalyst to lift the larger economies out of the recessionary quagmire. Among the top four eurozone countries,
Spain and Italy stand out as the most encouraging, with PMIs climbing by around 3 points and inching closer to the crucial
threshold of 50. Although Germany has witnessed a notable improvement in the PMI, it still lingers in contractionary territory,
and France's economic situation has remained nearly as dire as it was at the year's end.
</p><p>“Taking a sector-focused perspective, we are spotting some early signs of improvement. In Italy, the output of intermediate
goods increased for the first time in ten months. Over in Spain, the consumer goods' PMI stands solidly in the expansionary
territory, and the investment goods sector is edging towards growth. Meanwhile, in Germany, the order situation for
investment goods and intermediate goods is trending upward, although it might still take a few months to witness growth.”</p>

This article was written by Justin Low at www.forexlive.com.