Business activity in the eurozone returned to a good position in January. According to the survey, the results show that the European Union economy might again escape a contraction this quarter. Rise and uptrend, most likely until May.

In the last quarter of 2022, the eurozone exhausted its growth, and this is managing to avoid a recession. In addition, the gross domestic product has also expanded by 0.1%. Data from Eurostat showed on Tuesday that it outperformed expectations in a Reuters poll.

January is also the first month the index has been above the 50 mark since June for S&P Global's Composite Purchasing Manager's Index (PMI), one of the largest companies in Europe. So this is a sign that business output growth has begun to be seen.

"A resumption of business output growth, even marginal, is welcome news and suggests that the eurozone could escape a recession," said Chris Williamson, a chief business economist at S&P Global Market Intelligence, noting a modest uptrend in the S&P index on Friday.

This Makes Euro Zone Companies Slow Price Increases in 2023, but Central Bank Will Raise Rate

Demand might fall again as the new business index moves closer to the breakeven point. However, the pace of input costs increases for services. Last Thursday, the European Central Bank added 50 base points to its key interest rate to ward off inflation.

Although the pace of input is decelerating, the selling prices of the euro can go at a faster rate. It is stated that with this, the eurozone companies will slow price increases this year. And this means the outlook for costs and demand needs to be clarified.

The central bank raised interest rates on Thursday for the fifth straight time, and there may be more hikes ahead. This will put them in a solid position to fight high inflation. This pace of increase is to moderate certain outlook economic conditions.

The expectation of entrepreneurs for future price increases peaked in early 2022. This has also shown a steadily declining economic condition. However, economists also say they are optimistic about facing all the economic turmoil in 2023.

Previously, the ECB's governing council hiked its primary deposit rate by 50 basis points or 0.5 percentage points. This puts it at 2.5%. This also gives single if plans to bring in a similarly sized increase in the next meeting so that in March, there will be another increase.

ECB president, Christine Lagarde, told a press conference: "I get it, headline inflation has gone down. But underlying inflation pressure is there, alive and kicking, which is why we are so committed as we intend this monetary policy statement, and we are not done,"

Euro Zone Inflation Dips for a Third Straight Month, Energy Prices Make It That Way

Under these conditions, the euro was broadly unchanged at just under $1.10 after the bank's announcement. In this financial condition, headline inflation in the eurozone came in at 8.5% in January, while December recorded data at 9.2%.

Energy remained the most significant cost driver in January. But once more softened from previous levels, energy charges fell to an estimated 17.2% in January, down from 25.5% in December. That means that euro zone inflation has dipped for a third month.

Apart from that, there are also projections from various economists and the ECB poll that the Euro Zone's annual inflation could only be 2.1% in 2025. It was stated that the interest rate increase that the ECB was practicing was the reason.

Inflation is still in the shadow of the US central bank euro. They say that they continue to hike interest rates because of the threat of inflation. However, in the last three months, inflation has subsided. Eurozone business is also more stable and returning to growth levels.