The contraction in euro zone business activity continued into late 2023 due to a sustained slump in the dominant services sector, pointing to an ongoing recession, a survey revealed on Thursday.
S&P Global’s HCOB composite purchasing managers’ index (PMI) was revised upward for December to 47.6 in November after a preliminary estimate of 47.0. However, it remained below the 50 mark that defines growth or contraction.
The services PMI rose to a five-month high of 48.8 from November’s 48.7. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated:
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. The Composite PMI…is sounding the recession alarm for the euro zone though.
A similar survey on Tuesday showed that manufacturing activity in the euro zone contracted in December for the 18th consecutive month. However, despite signs of a continued slowdown in demand, composite prices rose at their fastest pace since June, signalling that inflation will remain above the European Central Bank’s 2% target 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. 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, the overall sentiment for the year ahead improved. The composite index of future production rose to a seven-month high of 57.6 from 56.0.
