Eurozone Private Sector Contracts In December

(RTTNews) - Eurozone private sector contracted at the end of the year reflecting the falls in Germany and France, while the rest of the region posted a solid increase in output. The HCOB flash composite output index rose to 49.5 in December from 48.3 in November, pointing to a softer and marginal fall in output, survey results from S&P Global showed Monday.

A marked reduction in output in the manufacturing sector just outweighed a renewed increase in the much larger service sector. The manufacturing Purchasing Managers' Index remained unchanged at 45.2 and was below the forecast of 45.3.

On the other hand, the services PMI advanced to 51.4 in December from 49.5 a month ago. The reading was expected to remain at 49.5.

New business dropped for the seventh straight month, with falls seen across manufacturing and services. New export orders decreased further.

Companies reduced their staffing levels again in December. The pace of job cuts accelerated to the most pronounced in four years. Meanwhile, backlogs of work declined for the twenty-first consecutive month.

On the price front, the survey showed that input prices climbed at the fastest pace in four months. While manufacturing input costs continued to fall, rising costs reflected a sharp and accelerated increase among service providers. Output price inflation also increased the most since August.

Manufacturers scaled back their purchasing activity in December. There were further marked declines in inventories of both purchases and finished goods.

Business confidence regained some ground but remained weaker than the series average. While manufacturing is still deep in recession, the rebound in services output is a welcome boost for the overall economy, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

Germany and France were the biggest drag on overall growth. Germany's private sector continued to shrink in December albeit the pace of contraction softened on a slight rebound in services activity.

The HCOB composite output index registered 47.8 in December, up from November's nine-month low of 47.2.

The services activity re-entered the expansion zone at the end of the year but it failed to compensate for a steep and accelerated decline in manufacturing output. The flash services PMI advanced more-than-expected to 51.0 from 49.3 a month ago. The expected score was 49.5.

Meanwhile, the manufacturing index declined to 42.5 from 43.0 in the previous month. The score was forecast to edge up to 43.1.

France's private sector contracted for the fourth straight month in December as both manufacturers and services providers registered declines in output. The composite output index posted 46.7 in December, up from 45.9 in November.

The hardest drag on activity came from the manufacturing sector, which posted the most rapid decrease in over four-and-a-half years. Service providers registered a weaker drop of activity compared to November.

The manufacturing index dropped unexpectedly to 41.9 from 43.1 in the previous month. The expected score was 43.2. Meanwhile, the services PMI rose to 48.2, while it was expected to remain unchanged at 46.9.