Eurozone private sector expands for first time in seven months. The eurozone private sector returned to growth at the start of the year after six consecutive months of contraction, raising hopes that the region might escape recession. Flash survey results from S&P Global showed on Tuesday that the eurozone’s composite Purchasing Manager’s Index (PMI) jumped from 49.3 to a seven-month high of 50.2 in January, above the consensus of 49.8 and above the 50 mark that separates expansion from contraction. While a mild contraction this winter remains possible, it looks increasingly likely that we may avoid a technical recession, defined as two consecutive quarters of negative real GDP growth. Chris Williamson, chief business economist at S&P Global Market Intelligence, said that a steadying of the eurozone economy might suggest that the single currency zone might escape recession.
US leading economic index shows another steep drop in December. A forward-looking measure of US economic activity sank for the 10th month in a row in December with a widespread weakening outlook for manufacturing, home building and both job and financial markets. The Conference Board Leading Economic Index (LEI) for world’s largest economy decreased by one percent in December 2022 to 110.5, following a drop of 1.1 percent in November. The LEI is now down 4.2 percent over the six-month period between June and December 2022—a much steeper rate of decline than its 1.9 percent contraction over the previous six-month period. Every time, since at least 1959, that the index dropped more than one percent year-on-year, a recession has hit in the subsequent months, Jim Reid of Deutsche Bank warns.
German consumer morale climbs as energy prices fall. Confidence among German consumers is expected to improve in February for a fourth month in a row, as better expectations for the economy and personal finances drive sentiment, amid lower energy prices and receding recession concerns. The German Gfk consumer confidence index rose to -33.9 heading into February 2023 from -37.8 the prior month and slightly shy of consensus of -33.2. "With the fourth increase in a row, the positive trend in consumer sentiment is consolidating," GfK's consumer expert Rolf Buerkl said. "Even though the level is still very low, pessimism has eased recently,"
UK private sector shrinks most in two years. The UK private sector saw the sharpest weakening in business activity in two years, the latest data showed. The S&P Global composite UK Purchasing Managers’ Index (PMI), which covers both manufacturing and services, slid to 47.8 in January from 49.0 in December, missing the 48.5 expected by economists. However, despite the gloomy start to the year, UK business expectations for the year ahead reached their highest level for eight months, supported by hopes of an improving global economic backdrop and falling inflation.
Australia interest rise likely in February after annual inflation hits 32-year high. Inflation in Australia rose to a new 32-year high of 7.8 percent in the fourth quarter of 2022. The annualised figure was underpinned by higher food prices, automotive fuel, and new residential construction, according to the Australian Bureau of Statistics. It marks the steepest pace in inflation since 1990. David Bassanese, Chief Economist for Betashares, said that Wednesday’s “larger-than-expected gain” would likely force the country’s central bank to hike the official interest rate by 0.25 percent. This would bring the cash rate to an 11-year high of 3.35 per cent.
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