Eurozone business activity remained subdued in December, raising fears of recession
Persistent downturn in the dominant services industry signals that contraction in euro zone business activity continued and indicates the bloc’s economy was in recession.
Eurozone Composite Purchasing Managers’ Index (PMI) was revised up for December to match November’s 47.6, but it remained below the 50 mark for the seventh consecutive month, suggesting that the 20-country currency union likely contracted in the last quarter of 2023, meeting the technical definition of a recession.
The services PMI inched up to a five-month high of 48.8 from November’s 48.7. Although it is not yet considered in recession territory, it still indicates a lack of growth orientation.as there are no clear signals of an imminent return to robust expansion in the services sector.
While the downturn in demand for services eased slightly in December, with the new business index rising to a five-month high of 47.1 from 46.7, it remained below the 50 threshold for the sixth consecutive month. This suggests continued challenges in generating new business.
Another survey, released on Tuesday showed that euro zone factory activity contracted in December for the 18th straight month, further contributing to the weak economic performance at the end of 2023.
Despite signs of a continued slowdown in demand, composite output prices increased at their quickest pace since June. This signals that inflation is expected to remain above the European Central Bank’s target of 2% in the near term.
Overall, the data indicates ongoing economic challenges in the euro zone, with persistent contraction in business activity and a heightened risk of recession.
The services sector, while not yet in recession territory, remains subdued, and the broader economic outlook is clouded by factors such as weak demand and rising inflationary pressures, which prompts policymakers to consider additional measures to stimulate economic recovery.