Technical Analysis

Eurozone December final services PMI 49.8 vs 49.1 prelim


  • Composite PMI 49.3 vs 48.8 prelim

A slight revision higher sees the downturn in the euro area economy ease as price pressures cool off towards the end of last year. That said, overall business conditions and sentiment remain subdued amid rising risk of a recession as inflation pressures continue to be rather persistent, even if energy prices have come off considerably in the past few months. S&P Global notes that:

“The eurozone economy continued to deteriorate in December, but the strength of the downturn moderated for a second successive month, tentatively pointing to a contraction in the economy that may be milder than was initially anticipated. Weaker declines were also seen broadly across the euro area nations, and most notably in Germany, whose economy has been the primary drag on the eurozone as a whole in the second half of this year.

“Cooling price pressures have helped temper the decline in economic activity levels. A particularly marked slowdown in manufacturing inflation bodes well for other sectors of the economy, although this has partly been down to relatively benign developments across European energy markets at the end of 2022. Services inflation remains stickier for now, reflecting a sharp rise in labour costs, which continued to be pushed up by continued hiring efforts.

“Nevertheless, there is little evidence across the survey results to suggest the eurozone economy may return to meaningful and stable growth any time soon. Demand conditions remained fragile as clients have retrenched, while business confidence remains bogged down by recession concerns, energy cost uncertainty and persistently high inflation and a tightening of financial conditions.”

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