Eurozone economic activity increased for the eighteenth successive month in December, with the latest PMI data signalling a mild gain in growth momentum at year-end. However, the rate of expansion remained among the weakest seen over the past year-and-a-half.
At 51.4 in December, from 51.1 in November, the final Markit Eurozone PMI® Composite Output Index was below the flash estimate of 51.7. Moreover, the
average reading over the final quarter as a whole (51.5) is the worst performance since the third quarter of 2013.
The slight improvement in growth momentum in December was centred on the service sector, where business activity rose at a faster pace. Manufacturing
production also continued to increase, but to the least marked degree during the current one-and-a-half year sequence of expansion. The gains signalled in both
sectors were also only modest overall.
Weakness was again evident in the big-three economies of Germany, France and Italy. German economic output posted a mild acceleration at yearend, but the rate of expansion was still lacklustre compared with earlier in 2014 as December saw inflows of new work fall for the second straight month.
Output in France fell for the eighth month running, as a slight recovery in service sector business activity failed to offset the deepening downturn in production at manufacturers. Overall new orders posted a modest gain for the first time in four months, but the data by sector showed that this was despite a severe reduction in manufacturing. Italy, meanwhile, fell back into contraction, as levels of output and new business both decreased over the month.
Better news was signalled in Ireland and Spain, which both saw strong and accelerated increases in economic activity and total new business.
Eurozone employment rose for the second month in a row during December. Workforce numbers increased in Germany, Spain and Ireland, offsetting further
reductions in France and Italy.
Input cost inflation eased to an eight-month low in December, as lower oil and commodity prices bought down costs at manufacturers to offset an increase at
service providers. Output charges fell again, however, as companies faced weak demand and strong competition.
The eurozone service sector remained on a soft track at the end of 2014. Although growth of business activity and new orders was recorded, with trends in both improving on those signalled in November, rates of expansion were only modest in both cases. A further drop in backlogs of work and muted business confidence also highlighted the underlying subdued conditions in the sector.
At 51.6 in December, up from November’s 11-month low of 51.1, the Eurozone Services Business Activity Index remained above the neutral 50.0 mark for the seventeenth month in a row but came in below the flash estimate of 51.9.
Over the three months to December, the average business activity index reading of 51.7 was the lowest for a calendar quarter since the same quarter of 2013 (51.2).
December saw the big-three economies continue to report lacklustre service sector performances. Output growth in Germany stabilised at November’s 16-month low, while Italy fell back into contraction for the first time since September.
Germany and Italy were both impacted by declining inflows of new business, with new orders falling for the first time in one-and-a-half years in the former and for the second straight month in the latter. Although France reported increases in business activity and new orders for the first time in four months, rates of expansion were only moderate.