The Eurozone’s flash Purchasing Managers Index (PMI) for January revealed sharp acceleration in service-sector inflation and significant job losses among German companies, according to data released by S&P Global on Friday.

Service-sector inflation surged at the fastest rate in 11 months, driven by a notable rise in output prices. Meanwhile, input costs for businesses across the Eurozone continued climbing, with manufacturing sector input prices rising at their steepest pace in three years.

The headline composite PMI remained steady at 51.5, matching forecasts and indicating modest expansion in overall business activity. However, the manufacturing sector contracted at 49.4, as output prices fell despite higher input costs. This suggests that manufacturers are unable to pass on rising costs to customers.

In the services sector, the PMI dipped to a four-month low of 51.9. Analysts highlighted the sharp increase in service-sector output prices as a critical concern for the European Central Bank.

“Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that the recovery remains ‘rather feeble’ and the results are ‘anything but reassuring’ for the European Central Bank,” the report stated.

The data also showed companies cutting staffing levels for the first time in four months, driven by job losses in Germany. Excluding pandemic-related disruptions, this decline represents the largest drop since November 2009. Employment growth continued across the rest of the Eurozone.

German businesses have been experiencing persistent job losses, particularly in manufacturing, where structurally higher energy costs and competitive pressures have weakened many legacy industrial enterprises.