Private sector business activity contracted at the start of the year and by fractionally more than originally thought. The 47.1 flash composite output index was nudged a tick lower and at 47.0, was down 0.3 points versus December's final print to touch a 3-month low.

The headline adjustment masked a slightly better performance by services where the 47.6 flash sector PMI was revised up to 47.7. Even so, this was still well down on the final 49.3 seen at year-end and a 5-month low. New business declined for a seventh straight month and at a faster rate than in December despite a reduced fall in overseas demand. Moreover, backlogs dropped at the steepest pace in just over three-and-a-half years. Even so, firms remain reluctant to shed staff and employment levels were again broadly stable. Additionally, business expectations for the year ahead were a little more optimistic.

Cost pressures rose further, and the inflation rate hit its highest mark since last May with wages the main driving force. Prices charged also posted another sharp rise and the inflation rate here remained well above pre-pandemic levels.

In summary, the January update remains disappointing and could presage another negative handle on quarterly GDP growth. However, the ECB is likely to be more concerned about the latest pickup in the inflation indicators. Today's update puts the German RPI at minus 11 and the RPI-P at 4, in broad terms indicating economic activity in general is moving much as the forecasters predicted.

No revisions are expected, leaving the key composite output index at 47.1, down from December's final 47.4.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. 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.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.