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HCOB's Composite Purchasing Managers' Index (PMI), compiled by
S&P Global and seen as a good gauge of overall economic health,
was revised up for December to match November's 47.6 after a
preliminary estimate of 47.0, but it remained below the 50 mark
separating growth from contraction for a seventh month.
That indicated that the 20-country currency union, which shrank
0.1% in the third quarter of 2023, likely contracted again last
quarter, 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.
"It's not quite recession territory yet for services, but the
vibe is far from growth-oriented. There are a lack of clear
signals indicating an imminent return to robust expansion," said
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
"The Composite PMI...is sounding the recession alarm for the
euro zone though," he added saying his economic modeling
forecast a contraction in the fourth quarter.
Although the downturn in demand for services eased slightly last
month with the new business index rising to a five-month high of
47.1 from 46.7, it remained below 50 for a sixth month.
That was similar to findings of a sister survey on Tuesday which
showed euro zone factory activity contracted in December for an
18th straight month, ending 2023 on a weak note.
Despite signs of a continued slowdown in demand, composite
output prices increased at their quickest pace since June,
signaling inflation will remain above the European Central
Bank's target of 2% in the near term.
"In the face of a stagnant services sector, it's impressive that
service providers are successfully transferring a portion of
their growing input costs to customers," added de la Rubia.
"This will go against those members of the European Central Bank
who are inclined to cut rates already in March. We expect a
first rate cut in June."
However, overall sentiment about the year ahead improved. The
composite future output index rose to a seven-month high of 57.6
from 56.0.
(Reporting by Indradip Ghosh; Editing by Hugh Lawson)
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