Eurozone PMI suggests a softer-than-expected recession

The deterioration in private sector activity in the euro area moderated substantially in December, when the composite purchasing managers' index (PMI) stood at 49.3 points from 47.8 in the previous month, suggesting that the contraction in the economy "may be milder than initially anticipated".

Thus, despite six consecutive months below the 50-point threshold that separates expansion from contraction in activity, the composite PMI reading in December was the best in five months.

In the case of the manufacturing PMI, the December figure came in at 47.8, up from 47.1 in November, its best reading in three months, while the services PMI rose to 49.8 from 48.5 in the previous month.

The sharp decline in inflation moderated pressure on the euro zone economy, stemming a fall in order books and a pick-up in business confidence, which remained, however, at historically subdued levels reflecting companies' concerns about the outlook for the energy market, high inflation and the growing risk of recession.

"The euro zone economy continued to deteriorate in December, but the strength of the slowdown moderated for the second month in a row, tentatively indicating a contraction in the economy that may be milder than initially anticipated," said Joe Hayes, senior economist at S&P Global Market Intelligence.

However, he cautioned that "there is little evidence in the survey results to suggest that the euro area economy can return to significant and stable growth in the near term".