Eurozone private sector growth falls to four-month low in January

LONDON (ICIS)–Manufacturing and service sector growth in the eurozone slowed to its lowest rate in four months, analyst Markit said on Wednesday, as price falls increase pressure on the European Central Bank to intervene.

The eurozone composite purchasing managers’ index (PMI) for the month slipped to 53.6 compared to 54.3 in December, as key economy Germany’s index slipped to a three-month low of 54.5, Markit said.

Italy also saw in its output fall to a four-month low of 53.8, while France’s private sector economy remained stagnant at 50.2 – PMI figures above 50.0 denote economic growth – below flash estimates of 50.5 but still a two-month high.

Among the other key economies in the region, Spain’s composite PMI growth increased to a two-month high of 55.3, while growth in Ireland reached 61.1, its highest level in half a year.

Deflationary cost pressures intensified during the month, with manufacturer’s purchase prices falling to their lowest levels in a year. This could be a headache for European Central Bank head Mario Draghi ahead of the bank’s planned review of its stimulus measures in March.

“Growth of activity, order books and employment all lost momentum, but perhaps most worrying of all from a policymaker’s perspective is the intensification of deflationary pressure,” said Markit chief economist Chris Williamson.

“Growth and inflation have clearly failed to pick up over the past year despite the renewed stimulus efforts from the ECB. This raises the question of whether existing stimulus has simply been insufficient, or whether monetary policy is proving ineffective,” he added.

Data from the start of the year signals a quarterly growth rate of around 0.4%, Williamson added. The eurozone economy grew by 0.3% for the last two quarters of 2015.