The decline in business activity in the eurozone eased this month as the bloc’s dominant services sector returned to growth, offsetting a long-running slump in manufacturing, a survey showed on Monday.
The preliminary composite purchasing managers’ index (PMI) for the eurozone, compiled by S&P Global, rose to 49.5 in December from 48.3 in November, but remained below the 50 mark that separates growth from recession.
A Reuters poll had previously forecast a decline to 48.2.
“The December PMI survey for the eurozone suggests that the economy is in recession,” said Jack Allen-Reynolds of Capital Economics. “While it is less reliable as a guide to GDP growth since the pandemic, other evidence also suggests that the economy is underperforming.”
The recession in Germany, Europe’s largest economy, eased slightly in December but business activity still contracted for a sixth straight month, the country’s PMI showed.
The same is true in France, where the services sector continues to shrink even as the recession slows.
The European Central Bank cut interest rates for the fourth time this year last week and is still leaving room for further easing as the European economy is weighed down by domestic political instability and the threat of a new trade war with the United States.
In Britain, outside the European Union, businesses cut staff at the fastest pace in almost four years this month, raised prices and became more pessimistic about the outlook, blaming much of it on tax increases by the new government.
An index measuring the eurozone services sector rose to 51.4 from 49.5, beating expectations in a Reuters poll for no change from November.
However, suggesting that companies do not expect an increase in activity anytime soon, they generally kept staff numbers steady, with the services employment index falling to 50.1 from 51.0.
The bloc’s manufacturing PMI, which has been below 50 since mid-2022, held steady at 45.2 in November, slightly below the 45.3 forecast in a survey. An index measuring output, which contributes to the composite PMI, fell to 44.5 from 45.1.
“The manufacturing crisis appears to be inexorable, with the production sub-index at its lowest level in a year, even as the overall reading is stable,” said Paolo Grignani of Oxford Economics.
Indicating no recovery in the near term, demand for manufactured goods in the eurozone weakened further with the new orders index falling to 43.0 from 43.4.
However, overall optimism rose. The composite future prospects index rose to a four-month high of 57.8 from 56.1.
