Euro zone business activity returns to growth in January, with demand stabilizing and services expanding, though optimism for future growth slightly wanes.
Euro zone business activity experienced a positive turnaround at the start of 2025, according to the latest data from the final composite Purchasing Managers’ Index (PMI), released by HCOB on February 5, 2025. The survey indicates that demand stabilized across the region, pushing the PMI to 50.2 in January, up from 49.6 in December 2024. This marks a return to growth following two months of contraction.
The PMI, compiled by S&P Global, is a key indicator of economic health and tracks business activity in the region. A score above 50 signals expansion, while a score below 50 indicates contraction. January’s figure of 50.2 suggests modest growth, driven by a slight recovery in the services sector. This was enough to offset the continued downturn in manufacturing, where growth remains sluggish.
The services sector showed signs of improvement, particularly in employment and new orders, leading to a modest increase in business activity. Services firms accelerated hiring to meet growing demand. However, there was a slight dip in optimism regarding future business conditions. The business expectations index fell to 58.5 from 58.8, continuing to remain below historical averages since mid-2024. Political uncertainties, such as upcoming elections, have contributed to this cautious outlook.
While the expansion in services provided some relief, manufacturing continued to face challenges. Experts suggest that the ongoing political and economic uncertainties are still weighing on growth prospects.
Despite these challenges, the stabilization in demand and modest growth in services bring hope that the region’s economy could gain more momentum in the first quarter of 2025.
The Euro zone, consisting of 19 EU countries that have adopted the euro as their currency, plays a crucial role in the global economy, and its recovery is watched closely by investors and policymakers alike. The HCOB PMI report is one of the most widely anticipated economic indicators in the region, offering insights into business conditions across various sectors.
The outlook for the remainder of the year will depend largely on global economic conditions and political developments within the member states of the Euro zone.
