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Euro zone business activity close to stagnation despite services bounce – PMI

Euro zone business activity remained close to stagnation at the end of last year, a survey showed today, as an upturn in services activity only partially offset a continued decline in the bloc’s manufacturing industry. 

IHS Markit’s final euro zone composite Purchasing Managers’ Index (PMI), seen as a good indicator of economic health, nudged up to 50.9 in December from November’s 50.6. 

That beat a preliminary estimate which suggested no change from the previous month but remained close to the 50 mark separating growth from contraction. 

“Another month of subdued business activity in December rounded off the euro zone’s worst quarter since 2013.

“The PMI data suggest the euro area will struggle to have grown by more than 0.1% in the closing three months of 2019,” said Chris Williamson, chief business economist at IHS Markit.

That is worse than the 0.2% growth predicted in a December Reuters poll. 

A PMI for the bloc’s dominant services industry bounced to 52.8 from November’s 51.9, above a preliminary reading of 52.4. 

But a manufacturing PMI out last week showed factory activity contracted for an 11th month in a row in December. 

The upturn in services meant firms were at their most optimistic about the year ahead since May. A composite future output PMI jumped to 59.4 from 57.9. 

Indicating services activity may remain resilient, firms in the sector were unable to match demand last month for the first time since July. The backlogs of work index climbed to 51 from 49.7.

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