Eurozone manufacturing PMI exceeds five-year high

Markit’s eurozone manufacturing purchasing managers' index rose to 55.1 from 54.9 in the previous month, exceeding analysts’ estimates for a reading of 54.8, the highest it’s been in over five years.

Eurozone services PMI, however, fell to 53.6 in January from 53.7, below projections for a level of 53.9.

This brought down the eurozone composite PMI, a measure of both manufacturing and services activity, to 54.3 this month from 54.4 in December, below the consensus forecast of 54.5.

Pantheon Macroeconomics said: “'Stable' is the main word to describe the January EZ PMI release. The manufacturing PMI rose marginally to 55.1, from 54.9 in December, which was offset by a trivial dip in the services index to 53.6, from 53.7 in December. The key message remains that private sector activity is solid, especially due to firmer export activity in the goods producing sectors.

“But inflation pressures are also rising sharply, which is a classic sign that growth now comes with a 'price' as the economy moves into the later stages of the business cycle. Input costs, in particular, pushed higher forcing EZ firms to scramble to raise prices. Not all were able to do so in equal measure, though, depressing margins in some industries and countries.”

Chief market analyst at XTrade Paul Sirani said: “Rising demand from the US and China boosted manufacturing across Europe towards the back end of last year, and the same can be said for the start of 2017.

“However, many will be considering whether this spike in manufacturing will soon come tumbling down. Political turbulence could govern Europe in the coming months, and US President Donald Trump’s continued pledge to impose a hefty tax on imports may have a damning effect on manufactures around the globe.”