U.S. services industry activity contracted for the first time in more than 2-1/2 years in December amid weakening demand, while the pace of increase in prices paid by businesses slowed considerably, offering more evidence that inflation was abating.

The U.S. economy continued to add jobs at a solid clip in December, but wage growth cooled slightly, easing fears that the labor market is too hot to allow inflation to fall.

Euro zone economic sentiment improved in December for the first time since the start of the war in Ukraine, European Commission data showed on Friday, with more optimism across all sectors of the economy and a sharp drop in inflation expectations.

The U.S. economy appears headed for a soft landing, with recent economic data pointing to an ongoing recovery, not a recession, White House economist Heather Boushey told Reuters on Friday.

The Federal Reserve will face some hard choices and delicate communications challenges as it fights still-high inflation even as the labor market begins to soften, Kansas City Federal Reserve Bank President Esther George said on Friday.

The Federal Reserve's move to smaller interest rate hike increments will help limit damage to the economy as the U.S. central bank works to bring high inflation down, Richmond Fed President Thomas Barkin said on Friday.