Euro zone economic system ended 2024 in precarious state, PMI reveals

LONDON (Reuters) – The euro zone economic system ended 2024 in a fragile state, in accordance a survey which confirmed general exercise contracted for a second straight month in December as a modest restoration within the companies trade didn’t offset a deeper downturn in manufacturing.

HCOB’s remaining composite Buying Managers’ Index for the bloc, compiled by S&P International and seen as a great gauge of general financial well being, rose to 49.6 in December from November’s 48.3.

That was simply above a 49.5 preliminary estimate however nonetheless under the 50 mark separating progress from contraction. Because of the vacation season the information had been collected sooner than traditional, with the survey performed Dec. 5-18.

The headline index was boosted by the bloc’s dominant companies sector, whose PMI bounced again above breakeven to 51.6 from November’s 49.5, however was weighed down by a sharper decline in manufacturing unit exercise.

“December PMI knowledge does not precisely lay a implausible basis for a service sector increase in 2025, however a minimum of incoming enterprise has stopped falling and the decline so as backlogs has softened,” mentioned Cyrus de la Rubia, Chief Economist at Hamburg Business Financial institution.

“Service suppliers can depend themselves fortunate that, not like producers, they don’t seem to be straight affected by the specter of U.S. tariffs. Total, they need to assist be sure that industrial weak point does not utterly drag down your entire economic system in 2025.”

U.S. President-elect Donald Trump, who returns to the White Home later this month, has pledged to impose tariffs on items throughout the board.

An index measuring new companies enterprise, a proxy for demand, nudged again into progress territory after three months of decline. It was 50.2 final month, up from 48.1 in November.

That was regardless of an increase in general costs charged as companies tried to recoup a sharper enhance in enter prices. The composite output costs index rose to a four-month excessive of 52.5 from 51.9.

“On the (December) ECB press convention, President Lagarde reiterated that companies inflation remains to be too excessive. December’s PMI survey for the companies sector verify this,” de la Rubia mentioned.

“For financial coverage, this implies the central financial institution ought to stay cautious and make solely small rate of interest cuts within the first quarter of 2025.”

The European Central Financial institution minimize rates of interest for a fourth time in December and saved the door open to extra easing because the euro zone economic system is dragged down by political instability at dwelling and the specter of a U.S. commerce warfare.

It’s anticipated to chop a minimum of 100 foundation factors extra this 12 months, in response to a Reuters ballot.