EZ composite PMI improves in December

The HCOB composite eurozone Purchasing Managers’ Index rose to 49.5 in December from 48.3 in the previous month and expectations of a slight fall to 48.2. A mark of 50 separates growth from contraction.

“The end of the year is somewhat more conciliatory than was generally expected. Service sector activity returned to growth territory and is showing a noticeable, if not exuberant, pace of expansion, similar to that seen in September and October,” said Hamburg Commercial Bank chief economist Cyrus de la Rubia.

“The manufacturing sector’s situation is still pretty dire. Output fell at a quicker pace in December than at any other time this year, and incoming orders were down too.”

“The destocking cycle in inventories shows no sign of stopping either. Meanwhile, global manufacturing PMI data signalled a stabilisation in operating conditions in November, offering a glimmer of hope that the downward trend might not continue unabated in the eurozone.

In the services sector, the index hit 51.4 from 49.5, reaching a two-month high, while the manufacturing output index came in at 44.5 from 45.1 - a 12-month low.

“As has now been the case for several months, the overall reduction in business activity in the euro area was reflective of falls in the largest two economies – Germany and France,” HCOB said.

“Both remained in contraction during December, with rates of decline easing only slightly from the previous month. In contrast, the rest of the eurozone posted a solid increase in output at the end of the year, with the rate of expansion reaching a six-month high.”

Analysts at Oxford Economics said mots worrying for the outlook was from employment "which is deteriorating at the fastest pace in four years in the eurozone".

"Despite the season, the last survey of the year didn't bring much cheer, although one can try to look for details to see the glass as half full. Indeed, the eurozone composite flash PMI rebounded in December, although it remains below 50 suggesting a contraction in activity."

"Overall, firms continue to signal a weak domestic and international demand environment. Employment is falling across all sectors, while price pressures appear to be resurfacing despite the weak macroeconomic outlook. The main good news in today's release comes from the resilience of services, which supports our modest GDP growth forecast for Q4."

Reporting by Frank Prenesti for Sharecast.com