Noor Trends News, Technical Analysis, Educational Tools and Recommendations
The euro zone’s economic activity contracted for the second consecutive month in December 2024, as ongoing weakness in the manufacturing sector overshadowed a modest recovery in services, according to the latest survey data.
Key Economic Indicators
- HCOB Composite PMI:
- Rose to 49.6 in December from 48.3 in November, slightly above the preliminary estimate of 49.5 but still below the critical 50.0 threshold separating growth from contraction.
- Data were collected earlier than usual (Dec. 5–18) due to the holiday season.
Sector-Specific Performance
- Services Sector:
- PMI climbed back into growth territory at 51.6, up from November’s 49.5, signaling a rebound in demand.
- New services business also improved, with its index edging up to 50.2 from 48.1, ending three months of decline.
- Manufacturing Sector:
- The sector’s performance continued to deteriorate, dragging down overall economic activity.
Price Pressures
- Companies raised prices in response to higher input costs, with the composite output prices index reaching a four-month high of 52.5, up from 51.9.
External Risks
- Political Instability and Trade Concerns:
- The euro zone faces increased uncertainty, with U.S. President-elect Donald Trump pledging to impose broad tariffs, raising fears of a trade war.
- ECB Policy Actions:
- The European Central Bank cut interest rates for the fourth time in December 2024, signaling its willingness to take further action to support the economy.
- Analysts anticipate at least another 100 basis points of rate cuts in 2025, according to a Reuters poll.
Outlook
The euro zone’s economic health remains fragile, with services showing signs of resilience but unable to offset the deeper slump in manufacturing. The ECB’s dovish stance and easing measures may provide some relief, but political instability and external risks, such as the threat of U.S. tariffs, continue to weigh heavily on the bloc’s prospects.
