The eurozone economy saw a solid end to 2015, with robust growth leading employers to take on extra staff at the fastest rate for just over four-and-a-half years. Output prices meanwhile continued to fall.
The Markit Eurozone PMI® dipped from 54.2 in November to 54.0 in December according to the preliminary ‘flash’ reading, but remained well above the 50.0 level. The expansion seen in December was sufficient to complete the strongest quarter of growth recorded by the survey for four-and-a-half years.
Manufacturing output rose at the fastest rate in 20 months, and outpaced the expansion in services activity for the first time in over a year. Services activity continued to rise solidly, albeit at the weakest pace since September.
Both sectors reported that further encouraging growth of new business led to ongoing job creation, pushing the overall rate of employment growth to the highest since May 2011.
With the survey recording the largest increase in backlogs of work since May 2011, companies look likely to continue to raise staffing levels to meet demand in coming months.
Business confidence for the year ahead rose to a four-month high in the service sector, resulting in a notably stronger hiring trend. Service sector employment showed the largest monthly gain since November 2010.
Payroll growth was more subdued in manufacturing, and eased marginally since November. Growth of factory headcounts has been stuck at a modest pace over much of the past year as producers have sought to cut costs and boost productivity.
Input costs meanwhile rose to the greatest extent seen for four months, due largely to a combination of higher import costs arising from the depreciation of the euro and some evidence of increased wages.
Prices charged fell slightly, however, with companies generally unable to pass higher costs on to customers due to intense competition.
While the PMI surveys signalled ongoing solid growth in Germany, rounding off the best quarter for one-and-a-half years, France slowed closer to stagnation. French businesses reported the weakest increase in activity since August.
A similar divergence was seen in relation to employment. Job creation in Germany was the joint-highest seen since September 2011, but staffing levels were unchanged in France.
Both Germany and France registered stronger overall manufacturing growth, although France continued to lag behind. Meanwhile, a combination of strong activity growth and sentiment in the German service sector contrasted with stagnation and a gloomier outlook at France service providers.
Elsewhere in the region, growth of business activity picked up to a four-month high, once again exceeding the pace of expansion seen in the two largest ‘core’ countries.
- The survey is signalling a quarterly GDP rise of 0.4%, meaning the region grew 1.5% in 2015.
- The survey data suggest GDP growth picked up in Germany during the fourth quarter, rising to 0.5% as strong domestic demand and increasing exports drove a broad-based upturn in manufacturing and services.
- It’s a different story in France, however, where the survey points to a mere 0.2% GDP rise at best in the fourth quarter, and a further slowing to near-stagnation in December bodes ill for the coming year – especially in the stalling service sector.”