Euro area’s services business activity recovers in December, PMI index rise to four-month high

Euro area’s services business activity rebounded in December. The IHS Markit Eurozone PMI Services Business Activity Index rose to a four-month high of 52.8 from November’s 51.9. All euro area countries covered by the survey saw growth in activity, led by Spain and Ireland. New work saw a similar-sized rise in December, although growth was again dampened by a reduction in new export business, the 16th in many months.

Capacity came under pressure, as hinted by a first rise in outstanding business for five months. Modest backlog growth encouraged companies to take on additional staff, although at the slowest rate since the beginning of 2019. Increasing staffing costs again drove input price inflation, which was little-changed at a marked level in December. Margins continued to be under pressure as output charges rose just modestly since the prior month.

For the 12 months ahead, business sentiment has bolstered to its highest level since July. The upturn was driven by a solid rebound in confidence amongst German service providers.