The Eurozone economy continued to contract at the start of the year but by the least since last July. At 47.9, the final composite output index matched its flash estimate and so remained 0.3 points above its final mark at year-end.

The 48.4 flash services PMI was similarly unrevised, declining 0.4 points versus its final year-end mark and indicating the steepest fall in activity in three months. New business was down for a seventh straight month while the drop in backlogs was the sharpest in almost three years. Still, with business expectations about the year ahead improving to their best level since last May, employment growth climbed to a 4-month high.

Inflationary pressures intensified. Both the input cost and output price inflation rates accelerated to register their strongest levels in four and seven months respectively.

In terms of national composite output indices, the best performing member state was Spain (51.5) which, alongside Italy (50.7) was above the 50-growth threshold. However, Germany (47.0) and France (44.6) remained well short.

In sum, the January updates suggest a further deterioration in overall Eurozone economic conditions and warns of another poor quarter for both output and demand. Even so, with the ECB firmly focussed on inflation, the latest cost and price developments will help to ensure that the Governing Council remains in no hurry to cut key interest rates. The final January data put the region's RPI at 11 and the RPI-P at 13, both measures showing economic activity in general running a little ahead of market expectations.

No revisions are expected, leaving the key composite output index at 47.9, up from December's final 47.6.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.