The composite PMI, which also includes manufacturing, rose to 50.4 from 48.3 in December. Markit, which compiles the surveys, talked of stabilisation, with the readings the highest in five months.
Howard Archer, chief UK and European economist at IHS Global Insight, said:
The overall return to modest growth in the eurozone services sector in January indicated by the purchasing managers’ survey boosts hopes that eurozone economic activity is stabilising after GDP contraction that we estimate around 0.4% quarter-on-quarter in the fourth quarter of 2011.
Among the individual eurozone countries, it was encouraging to see a marked pick up in services activity in December in Germany and, to a lesser extent, France. Services activity also saw significantly reduced contraction in Spain in January, but there was little reduction in Italy’s decline. Ireland also saw further modest contraction in services activity in January.
Nevertheless, a number of elements are still soft in the purchasing managers’ surveys and it is very possible that the eurozone will suffer further overall contraction in the first quarter of 2012. Significantly, the purchasing managers survey showed that overall incoming new business still contracted in January as did outstanding business, albeit at reduced rates. In addition, overall employment edged down in the services and manufacturing sectors for the first time since April 2010.
The region is still facing major headwinds, notably including increased fiscal tightening in many countries, rising unemployment and ongoing major concerns and uncertainties over the sovereign debt crisis which are likely to constrain businesses’ investment decisions. Meanwhile, relatively muted global growth is limiting export orders.
