Eurozone Private Sector Slowdown Underscores Risk Of Recession
The euro area private sector contracted throughout the second half of the year adding to risk of recession since the third quarter, preliminary results of the purchasing managers’ survey showed on Friday.
The HCOB flash composite output index unexpectedly fell to 47.0 in December from 47.6 in the previous month, S&P Global said. The reading was seen at 48.0.
The score suggested a seventh consecutive monthly decline in business activity across the euro area.
Manufacturing continued to lead the downturn and there was a steepening fall in the service sector output.
Services activity declined for a fifth successive month and the pace of fall was the third steepest since the lockdown of early 2021.
At 48.1, the services Purchasing Managers’ Index, or PMI, declined from 48.7 in November. The score was forecast to rise to 49.0.
At the same time, the manufacturing PMI remained unchanged at 44.2 in December, while it was expected to climb to 44.6.
The likelihood of the Eurozone being in a recession since the third quarter remains notably high, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.
A moderate 0.8 percent growth is expected for the upcoming year, following 0.5 percent expansion this year, Rubia added.
The overall fall in business activity was a reflection of deteriorating order books. The rate of decline remained unchanged on the steep pace seen in November.
Consequently, backlogs of work fell sharply with the rate of decrease ticking higher than in November.
As companies scaled back capacity in line with the softening demand, employment dropped for a second straight month.
Manufacturers reduced their purchasing activity at one of the steepest rates since the global financial crisis.
Inventories of finished goods also continued to be scaled back, largely in response to cost cutting amid weak sales.
Faster suppliers’ delivery times were reported for an eleventh consecutive month in December.
The survey showed a slowdown in input price inflation. Input prices posted the smallest monthly rise since August.
While input cost inflation softened in December, average selling prices rose at an increased rate, posting the largest monthly increase since May to remain high by the historical standards of the survey.
Companies were more optimistic about their year-ahead output with the sentiment hitting the highest since August.
The overall downturn in the currency bloc was led by France, where businesses reported the sharpest reduction in more than three years.
Germany also registered a steep contraction in December.
France’s composite output index fell to 43.7 in December from 44.6 in November. The accelerated fall in output volumes was the fastest since November 2020.
At 44.3, the services PMI hit a 37-month low and decreased from 45.4 in November. The manufacturing PMI slid to a 43-month low of 42.0 from 42.9 in the prior month.
Germany’s private sector contracted further at the end of the year with manufacturers and services firms recording slightly faster declines in activity.
The HCOB flash composite output index unexpectedly fell 46.7 in December from November’s 47.8. The reading was seen at 48.2.
The services PMI came in at 48.4, down from 49.6. The expected reading was 49.8.
The manufacturing PMI rose to a 7-month high of 43.1 from 42.6 in November. The score was close to economists’ forecast of 43.2.
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