Technical Analysis

Eurozone December flash services PMI 49.1 vs 48.5 expected

  • Prior 48.5
  • Manufacturing PMI 47.8 vs 47.1 expected
  • Prior 47.1
  • Composite PMI 48.8 vs 48.0 expected
  • Prior 47.8

The downturn in the euro area is seen easing in December, helped by an improvement in economic conditions in Germany mostly. That said, business sentiment remains subdued even as cost pressure are seen improving as the overall landscape remains rather challenging amid the high cost of living, rising rates, and the Russia-Ukraine conflict. S&P Global notes that:

“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. 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.

“The downside is that this improving inflation outlook is primarily 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.”

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button