The eurozone's private sector experienced a smaller contraction in December than anticipated, driven by a stronger performance in the services sector. The S&P Global Composite Purchasing Managers' Index (PMI) rose to 49.5 from 48.3 in November, remaining just below the neutral 50 mark that delineates growth from contraction.
Despite ongoing challenges in manufacturing, which has been in recession for three years, the services index climbed above 50, suggesting a potential for gradual recovery. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that while manufacturing struggles persist, the uptick in services offers a positive outlook for the overall economy.
The European Central Bank (ECB) has expressed concerns regarding economic prospects, having cut interest rates for the fourth time since June. President Christine Lagarde highlighted diminishing momentum and risks skewed to the downside, referencing increased friction in global trade. The ECB also revised its growth forecast for the coming year down to 1.1% from 1.3%.
Analysts remain skeptical about these forecasts, particularly in light of potential impacts from U.S. trade tariffs. Lagarde pointed out that ongoing consumption inertia has contributed to disappointing economic performance, although she remains hopeful that inflation concerns will ease.
Peter Kazimir from the ECB's Governing Council remarked that Europe's economic issues are largely structural, necessitating solutions beyond monetary policy, which supports the continuation of current rate cuts.