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Eurozone downturn may be easing

Euro area economic momentum received another boost last week with an upward revision to the January Purchasing Mangers’ Index (PMI) data. The eurozone composite PMI rose to a 10-month high of 48.6 in January, up from the December reading of 47.2. The reading for the services sector jumped to 48.6 from 47.8.

Although a PMI level below 50 means contraction, January’s increase is a welcome sign that the eurozone is finally seeing light at the end of the tunnel.

In the meantime, at its monthly meeting, the European Central Bank decided to keep its benchmark interest rate unchanged at 0.75 per cent.

During January, the UK services sector unexpectedly grew at the fastest rate in four months. This shows that the economy may avoid a triple-dip recession.

According to Markit Economics and the Chartered Institute of Purchasing and Supply, a measure of activity in this sector surged to 51.5. This is the highest level since September, up from the 48.9 in December, adding to signs of a recovery in the UK after GDP fell 0.3 per cent in the final quarter of 2012.

Separately, the Bank of England kept its benchmark interest rate unchanged at 0.5 per cent at the monthly meeting of its interest rate-setting Monetary Policy Committee.

Finally, according to the Institute of Supply Management, economic activity in the US non-manufacturing sector grew in January for the 37th consecutive month as the non-manufacturing PMI for January came in at 55.2, a decline from a revised 55.7 in December.

December’s reading was originally reported at 56.1, the highest since February 2012. A survey of economists by Dow Jones Newswires had expected January’s PMI to slip to 55.

The largely-as-expected ISM report comes on the heels of last week’s modest reading in the January labour markets, as the Labour Department reported non-farm payrolls rose by 157,000 and the unemployment rate ticked up to 7.9 per cent, even though job additions in November and December were substantially revised upwards.

This article was compiled by Bank of Valletta plc for general information purposes only.

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