EZ Dec PMI shows fall at slower rate

The fall in Eurozone business activity slowed in December, indicating that any recession in the single currency bloc could be milder than expected, a survey showed on Friday.

The downturn in the eurozone was seen easing in December, helped by an improvement in economic conditions in Germany, according to S&P Global.

December's flash composite PMI cam in at 48.8 versus expectations of 48.0. The services PMI index was 49.1 against expectations of 48.5 and the manufacturing PMI came in at 47.8 against an expected 47.1.

“While the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago," S&P Global said.

"The data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just less than 0.2%, and forward-looking indicators are currently boding well for the rate of decline to ease further in the first quarter."

“The manufacturing downturn has moderated especially markedly in December, led by Germany and linked to a combination of improving supply conditions and reduced fears of energy constraints. The service sector malaise has also calmed, in part driven by signs of reduced fears over the cost of living squeeze and, in the financial service sector, reduced concerns over the tightening of financial conditions."

“The outlook for inflation is especially encouraging, with supply chains now improving for the first time since the pandemic began and firms’ costs growing at a sharply reduced rate, feeding through to lower rates of increase for prices charged for both goods and services."

However, S&P said the downside is that this improving inflation outlook was mainly a symptom of falling demand, which has removed pricing power from many companies and their suppliers, and the business environment remains one in which confidence remains very subdued by historical standards.

"Thus, 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.”

Reporting by Frank Prenesti for Sharecast.com