The euro area experienced only a slight contraction in its private sector in December, buoyed by a rebound in services activity, according to final data from the purchasing managers' survey conducted by S&P Global. The composite output index climbed to 49.6 in December, up from 48.3 in November, slightly surpassing the preliminary estimate of 49.5. Despite this improvement, the index remained below the 50.0 threshold, indicating continued contraction.
Notably, the services Purchasing Managers' Index (PMI) increased to 51.6 in December from 49.5 the prior month, with an initial reading of 51.4. A score above 50.0 signals expansion in the sector. The survey revealed another decline in demand for goods and services, marking the seventh consecutive month of decreasing new orders. Additionally, employment declined at the joint-fastest rate seen in four years. Nevertheless, businesses managed to pare down their backlog of work, although inflationary pressures intensified.
Companies exhibited increased optimism for the coming year, with sentiment reaching its highest since September. In December, the contraction within the eurozone was driven entirely by the manufacturing sector, as services activities showed resilience. Germany, France, and Italy, the three largest economies in the euro area, each reported declines in business activity.
France emerged as the weakest performer, followed by Germany, while Italy registered only a slight decrease in output. Conversely, Spain defied the contraction trend, posting continued expansion in economic activity. The French private sector saw its downturn extend for a fourth month in December, though the composite output index edged up to 47.5 from November’s ten-month low of 45.9.
Similarly, France's services PMI saw improvement, rising to 49.3 from 46.9 in November, which had marked a ten-month low. Germany's composite output index remained in contraction territory below 50, as increased services activity was insufficient to counterbalance the decline in manufacturing. December’s index was 48.0, an improvement from November’s nine-month low of 47.3, and higher than the preliminary reading of 47.8. The services PMI in Germany also rose, reaching 51.2 compared to 49.3 the previous month, surpassing the flash estimate of 51.0.
Italy experienced a marginal downturn in its private sector, benefiting from renewed activity growth in services and a less pronounced decline in manufacturing output. The composite output index rose to 49.7 in December from 47.7 in November. Italy's services sector returned to growth by year-end, ending a short period of contraction, with its services indicator increasing to 50.7 from 49.2 in November.
In contrast, Spain's private sector saw growth at its fastest pace since March 2023. The composite output index surged to 56.8 from 53.2 in the previous month. The services sector experienced the most significant rise in output in 20 months, along with accelerated growth in manufacturing. Spain's services PMI soared to 57.3 from 53.1 in November.
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