Euro Area: Business activity contracts at a softer pace in December
The flash Eurozone Composite Purchasing Managers Index (PMI) rose to 48.8 in December from 47.8 in November. However, the index remained below the 50 no-change threshold, signaling another contraction in business conditions compared to the prior month.
Decembers increase was led by less-pronounced contractions in both manufacturing and services sector activity. New orders also fell at a softer rate. Moreover, business confidence strengthened, although it remained subdued by historical standards. On the price front, input inflation fell to the lowest level since May 2021, thanks to easing supply constraints and subdued demand. Consequently, output inflation declined to the slowest level in a year. That said, both remained elevated.
Commenting on the release, Chris Williamson, chief business economist at S&P Global Market Intelligence, stated:
“While the downturn is looking likely to be less steep this winter than previously anticipated by many, there remain few signs of any meaningful return to growth evident as 2022 comes to an end.”
Meanwhile, Bert Colijn, senior economist at ING, said:
“For the ECB, this must be quite a difficult survey to interpret. Yesterday, the central bank revealed a particularly hawkish take on the economic situation and ECB President Christine Lagarde noted that a mild recession is unlikely to be enough to tame inflation. While the downturn seems to be easing according to the survey, we also see that inflationary pressures continue to cool. For the doves on the governing council, the latter will likely fuel concern that the ECB could end up doing too much.”
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 0.6% in 2023, which is unchanged from last months forecast. For 2024, panelists see fixed investment increasing 2.2%.