Eurozone Private Sector Shrinks For Second Month

The Eurozone private sector contracted for the second straight month in December as services activity continued to drag on economic output, final data from IHS Markit showed Wednesday.

The composite output index climbed to 49.1 in December from 45.3 a month ago. The final result was lower than the earlier flash score of 49.8 and a reading below 50 suggests contraction.

“While the data indicate a renewed decline in eurozone GDP in the fourth quarter, the downturn appears to have been far less severe than seen in the second quarter, thanks to sustained strong manufacturing growth, rising global trade and lockdowns having been less onerous than earlier in the year,” Chris Williamson, chief business economist at IHS Markit said.

The manufacturing sector remained the principal bright spot of Eurozone economic performance, expanding for a sixth successive month. Meanwhile, services declined for the fourth consecutive period.

The services Purchasing Managers’ Index came in at 47.0, up from 46.0 in November. The flash score was 47.7.

There were notable country level divergences at the end of the year. Growth in Germany was underpinned by strong export performance. All other economies, except Ireland registered a contraction, although rates of decline eased noticeably in both France and Spain.

Italy was comfortably the worst performing as service sector activity continued to contract noticeably. The composite output index posted 43.0 in December versus 42.7 in November. Although, the services PMI rose to 39.7 from 39.4 in November, the reading was well below 50.

Germany’s private sector continued to show resilience in December as the strength in manufacturing offset the service sector weakness.

The composite output index advanced to 52.0 from a five-month low of 51.7 in November. But the reading was below the flash 52.5. The services PMI registered 47.0, up from November’s six-month low of 46.0 but weaker than the flash score of 47.7.

The French private sector contracted at the softest pace during the current four-month sequence of decline. The composite output index rose to 49.5 from 40.6 in the previous month. The flash score was 49.6.

At the same time, the services PMI improved sharply to 49.1 from 38.8 a month ago but remained slightly below the flash 49.2.

There was a noticeable improvement in Spain private sector output in December. The composite output index rose to 48.7 from 41.7 a month ago. The services business activity index climbed to 48.0 from 39.5 in the previous month.

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