US business activity, without starting engines

Business activity in the main economies presented two sides of the coin in January. While the United States remained in contractionary territory for the seventh consecutive month in January, the euro zone exceeded the 50-point threshold (a measure that separates contraction from expansion) for the first time in six months.

According to the US manufacturing Composite Purchasing Managers’ Index (PMI) produced by S&P Global, activity rose to 46.6 points from December 45, however, it did not reach 50 points.

Although this is the highest number in three months, companies continued to point out that demand is weak and that high inflation is a drag on customer spending.

The concern is that not only did the survey indicate a slowdown in economic activity earlier in the year, but the rate of input cost inflation accelerated in the new year,” said Chris Williamson, chief business economist at S&P. Global Market Intelligence, through a statement.

“This may encourage more aggressive monetary policy tightening by the Federal Reserve, despite rising recession risks,” Williamson added.

Eurozone, in the opposite direction

For its part, the composite PMI of the euro zone advanced to 50.2 points from 49.3 registered in December. “Chances of seeing the eurozone emerge from recession appear to be shaping up, with the latest PMI data showing a stabilization of the region’s economy in January,” Williamson said.

Andrew Kenningham, economist at the consultancy Capital Economics, highlighted that it is the third successive increase in improvement and presents evidence that the region has avoided, for now, the drastic recession that “we and many others predicted”.

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

However, he cautioned that this in no way means that the European economy is enjoying a clear sky.

The European economy is resisting the onslaught of the negative consequences of the war in Ukraine and since November the rise in inflation has stopped, with an improvement in the situation of supply chains and the recent economic reopening of China.

United Kingdom, deteriorates

Despite the positive figures from the euro zone, the UK was not so lucky, as its composite PMI index fell to 47.8 from 49 in December, raising warning signs of a recession.

“Labor disputes, staff shortages, export losses, the rising cost of living and interest rate increases have once again accelerated the pace of economic deterioration,” Williamson explained.

The British economy grew in November, according to official data published at the beginning of the month.