Euro Area's service sectors records margin decline in business activity in December

The S&P Global Eurozone Services PMI Business Activity Index rose to 49.8 in December from 48.5 in November, signalling only a marginal decline in service sector output across the euro area. Overall, this was the softest decrease in activity since last August.

A sixth successive monthly reduction in new business was registered in December. Falling export orders also contributed to this. That said, the overall rate of decrease in new workloads was the softest in five months. This led the companies to focus on orders pending completion.

An expansion in employment also boosted resource availability. The rate of job creation was only fractionally stronger than the 20-month low seen previously, however.

Input prices and output charges both rose markedly in December, although rates of inflation eased to 11- and four month lows respectively. Finally, business confidence edged up to a four-month peak but remained historically subdued.

Further, the seasonally adjusted S&P Global Eurozone Composite PMI Output Index registered in sub-50.0 contraction territory for a sixth consecutive month in December, signalling a sustained downturn in economic activity across the euro area.

That said, at 49.3, which was up from 47.8 in November, the latest survey data signalled the slowest decline since last July, when activity levels first started shrinking. The decrease has now softened in each of the past two survey periods.

The eurozone economy remained mired in a downturn at the end of 2022, although there were signs that weakness was dissipating as private sector business activity shrank only marginally and at the softest pace since last July.

Alleviating pressure on the euro area economy was a further marked easing of inflation, leading to a slower fall in order books and another uptick in business confidence.

Overall business sentiment remained historically subdued, reflecting company concerns regarding the energy market outlook, high inflation and the rising risk of recession.

Meanwhile, although price pressures subsided, energy and personnel costs kept the overall rate of input price inflation in hot territory. Meanwhile, the labour market showed resilience again as employment rose for a twenty third successive month.

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