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Written by Indradip Ghosh
BENGALURU (Reuters) – The contraction in euro zone business activity continued into the end of 2023 due to sustained weakness in key services industries, a survey showed on Thursday, pushing the euro zone economy into recession. Shown.
The HCOB’s Purchasing Managers’ Index (PMI), compiled by S&P Global and considered an appropriate indicator of overall economic health, was revised upward in December from a preliminary reading of 47.0 to 47.6 in November. , still below 50, which is the dividing line for growth. From the 7th month of labor.
This indicates that the 20-nation monetary union, which contracted by 0.1% in the third quarter of 2023, is likely to contract again last quarter, meeting the definition of a technical recession.
The services sector PMI rose to 48.8, the highest level in five months, from 48.7 in November.
Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, said: “Although the services industry is not yet fully in recession territory, the atmosphere is far from growth-oriented. “There are no clear signs that this is the case.”
“The headline PMI…is sounding the alarm of a recession in the euro area,” he added, noting that his economic modeling predicted a contraction in the fourth quarter.
Last month’s new business index rose from 46.7 to 47.1, the highest level in five months, and although the drop in demand for services has eased somewhat, it remained below 50 for the sixth consecutive month.
This echoed results from a sister survey on Tuesday that showed euro zone factory activity contracted for the 18th straight month in December, ending 2023 on a weak note.
Despite signs of continued demand slowdown, headline output prices rose at the fastest pace since June, suggesting that inflation will remain above the European Central Bank’s 2% target in the near term. There is.
“In the face of the stagnation in the services sector, it is impressive that service providers have successfully passed on some of the increased input costs to their customers,” Della Rubia added.
“This would go against European Central Bank members who were already leaning toward a rate cut in March. We expect the first rate cut in June.”
However, overall sentiment for next year has improved. The composite future production index rose from 56.0 to 57.6, the highest level in seven months.
(Reporting by Indradip Ghosh; Editing by Hugh Lawson)
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