Euro Zone’s Composite PMI Indicating Potential Recession: December Update


  • HCOB’s Composite Purchasing Managers’ Index (PMI) was revised upwards for December to match the previous month’s score of 47.6, staying below the 50 point threshold for seven months in a row.
  • This raises concerns that the 20-country currency union, which dropped 0.1% in Q3 2023, could enter a technical recession after a similarly poor Q4.
  • The service PMI has seen a minor increase to a five-month high of 48.8 this month.

The Composite Purchasing Managers’ Index (PMI) of HCOB, which is complied by S&P Global and considered a reliable indicator of economic well-being, maintained its streak of seven months below the 50-point cutoff between growth and contraction. It was also upwardly adjusted in December to equal November’s score of 47.6 after an initial valuation of 47.0.

20-Country Currency Union Contracted

The 20-member currency federation, faced a 0.1% contraction on the third quarter of 2023, and the recent data suggests that the previous quarter may have seen similar results. This meets the conventional criteria for a recession.

Services PMI Rise

The Services PMI experienced a minor climb, hitting a five-month peak of 48.8 from 48.7 in November. Cyrus de la Rubia, Hamburg Commercial Bank’s senior economist, speculated on this development. He stated, “The economic landscape for services isn’t quite in recession yet, but it’s noticeably off growth. No definite signs foretell any imminent resurgence of robust expansion.”

Euro Zone Recession Alarm

Despite the correction in the PMI move, de la Rubia remarked it was still “sounding the recession alarm for the euro zone.” His economic models project a contraction in Q4.

Stubborn Demand

According to a comparable survey released on Tuesday, euro zone factory output fell in December for an 18th consecutive month, signalling an underwhelming end to 2023. Despite this, providers were able to pass on a portion of their escalating input costs to customers, prompting output prices to rise at their fastest rate since June.

Annual Outlook

The overall outlook improved for the year ahead. Despite poor performance, the composite future output index increased dramatically to a seven-month high of 57.6 from 56.0.

The unsatisfactory performance of the eurozone, as suggested by various PMIs and economic indicators, is expected to influence foreign exchange and trading. This economic instability could affect assets held within the eurozone.

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