Eurozone recession fears ease, signs of slower contraction rate: S&P

Firms' costs notably rose at the slowest rate for over one-and-a-half years, reflecting the combination of weakened demand and improved supply, the latter signalled by the first quickening of supplier delivery times since the pandemic began, it noted.

However, the overall level of business sentiment remains subdued by historical standards, reflecting the challenging environment caused by the high cost of living, rising interest rates, concerns over energy supply and the Ukraine war, the consulting firm said in a release.

The seasonally adjusted S&P Global eurozone PMI composite output index rose for a second successive month in December, increasing from 47.8 in November to a four-month high of 48.8, according to the preliminary 'flash' reading.

Although remaining below the neutral 50 level to indicate a sixth successive fall in business activity, the PMI has now signalled an easing in the rate of contraction for two months in a row.

The subdued level of the PMI nevertheless means that the fourth quarter as a whole has seen a worse performance than the third quarter, with the average PMI for the three months to December indicative of the sharpest economic contraction since 2013 if pandemic lockdown months are excluded, S&P Global said.

However, while the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago.

While manufacturing continued to lead the downturn, with factory output dropping for a seventh straight month, the rate of production decline eased to indicate a further marked cooling in the pace of contraction compared to October's steep fall. The manufacturing output index rose to 47.9, a six-month high, against 46.0 in November.

Within the euro area, the fall in output was also broad-based by region but only France saw a deepening downturn. Germany, meanwhile, saw rates of decline moderate across manufacturing.

ALCHEMPro News Desk (DS)