Eurozone PMI Services for December was finalized at 51.6, an improvement from November’s 49.5, signaling a return to growth after a brief contraction.
Meanwhile, PMI Composite edged higher to 49.6, up from November’s 48.3, though still indicating a slight contraction in overall activity. Among individual countries, Spain stood out with a 21-month high at 56.8, while Germany and France posted modest improvements to 48.0 and 47.5, respectively.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that “services inflation remains elevated,” driven by rising wages and higher costs being passed on to customers. These dynamics reinforce the expectation that ECB will take a cautious approach to monetary policy.
“Small interest rate cuts in the first quarter of 2025” appear likely as the central bank balances inflation concerns with sluggish economic growth.
Encouragingly, the services sector displayed resilience, with incoming business stabilizing and the decline in order backlogs slowing. Service providers, less exposed to the potential impacts of US tariffs than manufacturers, remain a crucial buffer against the region’s industrial slowdown.
However, the foundation for a robust services-led recovery in 2025 remains tenuous, with structural challenges such as high costs and fragile demand persisting.
