Eurozone registers increase in business activity and hopes to avoid a recession

Business activity in the euro zone grew in January for the first time in six months, according to the PMI survey, a result that strengthens expectations that Europe avoid falling into recession.

The S&P Global Flash PMI index, based on business surveys, rose to 50.2, after standing at 49.3 in December. In this indicator, an index greater than 50 indicates an increase in economic activity.

The European economy is resisting the onslaught of the negative consequences of the war in Ukraine and since November the escalation of inflation has slowed, with an improvement in the situation of supply chains and the recent opening of the Chinese economy.

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“The chances of seeing the Eurozone emerge from recession seem to be shaping up, the latest flash PMI data shows a stabilization of the region’s economy in January”said Chris Williamson, chief economist for S&P Global.

For his part, Andrew Kenningham, economist at the consulting firm Capital Economics, stressed that it is “The third successive increase in improvement and presents evidence that the region has for now avoided the drastic recession that we and many others had anticipated.”

Until barely three months ago, economic analysts were practically unanimous in projecting a contraction in the European economy, mainly due to the impact of the war in Ukraine.

Hit less hard than expected

During almost all of 2022, inflation broke records, in a trend that turned on the alarm lights.

The European economy was timidly rehearsing a recovery after the devastating impact of the coronavirus pandemic, but was hit by persistent inflation and the sustained increase in consumer energy prices.

For the economist Bert Colijn, from the ING bank, the slight recovery was aided by a month of December that was less cold than expected and that allowed the reconstitution of gas reserves in European countries.

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Williamson, in turn, pointed out that the result represents “good news suggesting that the hit will be much less severe than previously anticipated and that a recession appears to have been averted.”

But nevertheless warned that “no way” this means that the European economy enjoys a clear sky.

Williamson’s warning is in line with an alert formulated a week ago at the Davos Forum by the European Commissioner for the Economy, Paolo Gentiloni, about a “moderate growth” in the year 2023.

According to Gentiloni, the scenario is still marked by the continuation of the war in Ukraine, a factor that still weighs down the bloc’s economy.

That same week, the president of the European Central Bank (ECB)Christine Lagarde, said that the region could experience a “small contraction” instead of a complete recession.

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The European Commission will publish data on the economy for the fourth quarter of 2022 on Tuesday.

In September of last year, it projected a GDP growth of 0.3% for 2023, against 3.2% registered in 2022 and 5.3% in 2021.

Source: AFP