What's going on?

Data out on Tuesday suggested that the eurozone hit the ground running in 2023, with business activity growing unexpectedly this month.

What does this mean?

It�s January: the weather�s cold and the days are short, so you might expect us all to be united in our misery. But in Europe there�s a little holdout of optimism among purchasing managers, who responded to this month�s business activity surveys with unseasonably chipper answers. That stands to reason, too: an especially mild winter and badly needed government handouts helped to ease the region�s energy fears. Plus, companies� confidence is swelling thanks to freshly freed-up supply chains and the fact that China�s re-opening is probably poised to jump-start demand. That could be why January�s purchasing managers� index � which measures activity across manufacturing and service sectors � showed growth for the first time since June last year.

Why should I care?

For markets: Fickle forecasters.
Economists are changing their tune about the eurozone: after months of doom-and-gloom warnings, they�ve come to the conclusion that the region might actually dodge a recession and clock up a small but mighty 0.1% growth this year. That�ll please the European Central Bank: after all, the data suggests that the economy�s strong enough to bear a few more rounds of inflation-busting rate hikes. Markets are already pricing that in too, betting on a pair of 0.5 percentage-point bumps over next two months.

Zooming out: British bruising.
Europe�s relatively breezy optimism is in stark contrast to its British neighbors, where data out on Tuesday showed that output�s fallen at the fastest rate since the pandemic first struck. That�s hitting the UK where it hurts, with the services sector � a key driver of the UK economy � dropping off the sharpest cliff. No surprise, then, that economists think the UK�s already slipped into a recession, one that could last most of 2023 according to a survey by Bloomberg.