Eurozone business activity downturn deepens in December

BRUSSELS — Business activity in the eurozone slumped at a faster rate in December, weighed down by a deeper downturn in France, a key survey said recently.

The HCOB Flash Eurozone purchasing managers' index (PMI) published by S&P Global fell to 47 in December from 47.6 in November. A figure below 50 indicates contraction.

The risk of recession in the 20-nation single currency area remains, analysts warned.

"Once again, the figures paint a disheartening picture as the eurozone economy fails to display any distinct signs of recovery," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"The likelihood of the eurozone being in a recession since the third quarter remains notably high," he added.

The eurozone economy shrank by 0.1 per cent in the third quarter, official data shows.

In France, the EU's second-biggest economy, businesses reported the sharpest reduction in activity since March 2013 — excluding the coronavirus pandemic period — S&P Global said, affecting both the manufacturing and services sectors.

Business activity also slumped in Germany, the bloc's biggest economy.

The eurozone PMI score has now fallen for seven successive months.

"All told, the December PMIs point to a deepening recession and easing labour market but not yet to a decisive turnaround in inflationary pressures," said Andrew Kenningham, chief Europe economist at Capital Economics.

"However, we expect that to change in the coming months as the recession drags on," he said in a note.

Eurozone inflation has fallen since its peak of 10.6 per cent in October 2022, reaching 2.4 per cent in November this year — closer to the European Central Bank's (ECB)-per cent target.

The bank on Thursday kept borrowing costs unchanged and warned that the fight against inflation was not over as hopes for an interest rate cut persist. 

The ECB also said it expected the eurozone economy to grow by 0.6 per cent this year, slightly down from a previous forecast of 0.7 per cent.