The eurozone’s Purchasing Managers’ Index (PMI) rose to 48.8 points in December from 47.8 in November, S&P Global said. The index, which hit its highest level in 4 months, signalled that market participants believed the ongoing recession was milder than previously forecast.
The increase suggested the EU economy recovered slightly in December. A PMI reading above 50 points indicates business activity has increased, while a score below 50 signals that activity has declined.
The economists noted that business activity in the eurozone had stabilized as supply chain issues eased, inflation decreased, and business confidence grew. At the same time, production expenditures of some companies rose at the slowest pace in 18 months. The relatively stable PMI data for December implies that recession in the eurozone will be mild.
The manufacturing PMI rose to 47.8 points in December from 46 in the previous month. Business activity notably intensified in the tourism and recreation sector, as well as the household goods sector.
However, the eurozone’s overall economic situation remains negative, as business activity has declined for a sixth consecutive month. The average PMI for the three months to December posted the sharpest decline since 2013.
The steepest downturns were observed in the chemical, plastics, and basic resources sectors due to high electricity costs. The fourth consecutive ECB interest rate hike has exacerbated the situation. The EU regulator once again increased the interest rate by 50 basis points to 2.5% on December 21. Christine Lagarde, the president of the European Central Bank, said she expected “a shallow and short-lived recession,” meaning that the ECB would maintain its policies to fight inflation.
