Private-sector activity in the euro area grew less than anticipated in December as Germany’s industrial sector unexpectedly deteriorated.
The composite purchasing managers’ index (PMI) compiled by S&P Global slipped to 51.9 from 52.8 in November, holding above the 50 threshold separating growth from contraction. Analysts had predicted a largely unchanged reading.
Germany was the main weak spot, with manufacturing slumping to a 10-month low and services also underperforming. By contrast, French factories surprised analysts by recording the strongest growth in more than three years.
“The weaker performance is primarily attributable to German industry, where the downturn intensified,” Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said on Tuesday in a statement. “All in all, the runway into the new year seems pretty unstable.”
Europe has been grinding out growth in the face of trade upheaval and geopolitical stress. After a solid third quarter, the economy is set to lose some momentum in the final months of 2025 before picking up again in the new year.
The figures will help inform the European Central Bank (ECB) as it sets interest rates for the last time this year on Thursday. Investors and analysts don’t see the current economic trajectory shifting monetary policy for the foreseeable future, with inflation also holding near the 2% target.
With Germany splashing hundreds of billions of euros on infrastructure and defence, president Christine Lagarde said last week that new ECB forecasts will probably point to a more optimistic view on growth. The previous outlook envisaged expansion of 1% next year.
“We expect the service sector to continue to play a stabilising role for the economy as a whole in the coming year,” de la Rubia said. “However, a real upturn will only succeed if the manufacturing sector regains its footing.”
He also highlighted the quickest price gains in services in nine months, saying inflation pressures driven by wages remain “noticeable.”
PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP.
Data later on Tuesday are expected to show composite PMI readings in the UK and the US remaining well above 50.
Source: theedgemalaysia