The Eurozone's private sector experienced a contraction towards the end of the year, primarily driven by declines in Germany and France. However, the remaining regions demonstrated robust output growth. According to survey data released by S&P Global on Monday, the HCOB flash composite output index increased to 49.5 in December, up from 48.3 in November, indicating a milder and more marginal decrease in output.
The manufacturing sector saw a significant reduction in output, which narrowly outweighed the resurgence in the larger service sector. The Manufacturing Purchasing Managers' Index (PMI) held steady at 45.2, falling slightly short of the anticipated 45.3.
Conversely, the services PMI rose to 51.4 in December, compared to 49.5 in the previous month, contrary to expectations that it would remain at 49.5.
For the seventh consecutive month, new business saw a decline, affecting both manufacturing and services, with a further drop in new export orders.
Employment levels contracted once more in December, with job cuts accelerating to their most significant point in four years. Additionally, work backlogs continued to diminish, marking the twenty-first month of consistent decline.
The survey revealed that input costs soared at their most rapid rate in four months. In manufacturing, input costs continued to decrease, while service providers faced a sharp and accelerated rise in costs, leading to the highest increase in output price inflation since August.
Manufacturers reduced their purchasing activities in December, leading to notable reductions in inventories of both raw materials and finished goods.
Business confidence showed signs of improvement, though it remained below the average for the series. While manufacturing is entrenched in recession, the recovery of the services sector offers some optimistic prospects for the broader economy, according to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
Germany and France emerged as the primary contributors to the slowdown in growth. Germany's private sector continued to contract in December, although the pace eased slightly due to a minor revival in services activity.
The HCOB composite output index registered 47.8 in December, increasing from November's nine-month low of 47.2.
Services activity returned to expansion at the year's end but was unable to offset the stark and accelerated decline in manufacturing output. The flash services PMI exceeded expectations, rising to 51.0 from 49.3 the previous month, with forecasts at 49.5.
Conversely, the manufacturing index fell to 42.5 from 43.0 the month before, contrary to predictions of a slight increase to 43.1.
In France, the private sector contracted for the fourth successive month in December, with declines noted in both manufacturing and services output. The composite output index rose to 46.7 in December, up from 45.9 in November.
The manufacturing sector was particularly affected, experiencing the steepest decline in over four-and-a-half years, while service providers saw a milder drop in activity compared to November.
Unexpectedly, the manufacturing index decreased to 41.9 from 43.1 the prior month, against an expected score of 43.2. Meanwhile, the services PMI increased to 48.2, surpassing expectations of remaining steady at 46.9.
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