- Composite PMI 53.3 vs 53.4 prelim
Euro area economic growth stumbled in December as the pandemic flares up, largely weighed down by Germany. The region's biggest economy saw activity slump to its lowest in 18 months amid a surge of COVID-19 infections and tighter restrictions.
The downturn in the services sector is what stands out last month, with price pressures continuing to stay more elevated heading into the new year. On the latter, that reaffirms the notion that inflation is not likely to abate any time soon. Markit notes that:
“The accelerated expansion in output we saw in November unfortunately turned out to be brief. Amid a resurgence of COVID-19 infections across the euro area, growth slowed to the weakest since March in December. In Germany, where measures to combat COVID-19 have been more stringent than other monitored euro area countries, levels of economic activity broadly stagnated in December. Nonetheless, slower growth was seen across the board.
“The spread of the Omicron variant had a particularly profound impact on the services sector, reflecting renewed hesitancy among customers due to the novel strain of the virus. Looser travel restrictions in recent months had facilitated greater levels of tourism, which in turn provided additional support to the eurozone service sector. However, this was withdrawn in December as overseas demand declined for the first time since May.
“There was also little to cheer with regards to inflation. Although there was a marginal easing of price pressures, we’re still in excessively hot territory – increases in both input and output costs were the second-quickest on record.
“As euro area nations deal with the latest developments in the pandemic, it’s clear that risks to the economy are now greater as tighter restrictions to curb the spread of COVID-19 are more likely than they have been recently.”
