Euro zone recession may not be as severe as anticipated, according to PMI

by Mapping Returns

According to a study, corporate activity in the euro zone shrank less than previously believed at the end of last year as price pressures subsided. This suggests that the recession in the EU may not be as severe as initially anticipated.

A reliable indicator of economic health, S&P Global’s final composite purchasing managers’ index (PMI) for the euro zone increased to 49.3 in December from November’s reading of 47.8 and beat the preliminary forecast of 48.8.

December marked a five-month high for the indicator, which had been below the 50-point threshold distinguishing expansion from contraction since July. Due to the Christmas season, the final data was compiled last month earlier than usual.

According to Joe Hayes, senior economist at S&P Global Market Intelligence, “the euro zone economy continued to deteriorate in December, but the strength of the downturn moderated for a second consecutive month, tentatively pointing to a contraction in the economy that may be milder than was initially anticipated.”

However, there isn’t much evidence in the survey data to suggest that the euro zone economy will soon resume meaningful and consistent development.

According to a Reuters poll conducted in December, the region’s economy shrank by 0.3% last quarter and by 0.4% this quarter.

Even while it happened at a slower rate than first anticipated, demand overall fell for the sixth consecutive month. The PMI new business index increased from 45.8 to 47.0, comfortably above the 46.5 flash estimate.

A PMI measuring the bloc’s leading services sector increased from 48.5 in November to 49.8, just missing the breakeven barrier. 49.1 was the initial estimate.

Last month, price pressures in the industry decreased but nonetheless remained high. The production price index fell from 62.3 to 61.0, its lowest level since August.

The European Central Bank’s decision-makers, who have been tightening monetary policy in an effort to manage inflation that has risen much beyond their target, are sure to appreciate that.

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