Manufacturing and services in the 18-nation Euro area barely expanded in December as sluggish growth in Germany and France kept business activity subdued.
Markit Economics said a composite index for manufacturing and services rose to 51.7 from 51.1 in November, just above the 51.5 level forecast by economists in a Bloomberg survey. A reading exceeding 50 indicates expansion. A factory gauge increased to 50.8 from 50.1, while a measure for services rose to 51.9 from 51.1.
With France barely growing this year, Italy in recession and Germany struggling to leave a mid-year weak patch behind, the European Central Bank is readying further stimulus as governments wrangle over economic reforms. Some support for euro-area consumers may come from oil prices that have fallen more than 40 percent this year, while exporters may benefit from a weaker euro.
"The Euro zone saw slightly faster growth of business activity in December but still ended the year on a whimper rather than a roar, with worrying weakness still evident in the core countries of France and Germany," said Chris Williamson, chief economist at Markit in London. "The upturn was therefore driven by the rest of the region, where growth hit a five-month high to round off the best year the 'periphery' has seen since 2007."
New orders
New orders recorded a marginal increase, while employment growth was the fastest since July, Markit said. Input costs rose at the slowest rate in eight months in December, reflecting the impact of cheaper fuel, according to the report. Selling prices have contracted for more than 2 1/2 years.
In France, the manufacturing PMI unexpectedly declined to 47.9 from 48.4, adding to evidence the region's second-largest economy is struggling to grow. In Germany, private-sector growth slowed to the weakest in 18 months in December.
The ECB could start purchasing government debt and other assets as soon as next quarter, after President Mario Draghi indicated the danger to the central bank's mandate posed by too-low inflation. Whereas the ECB aims to keep average price gains at just under 2 per cent, the rate fell to 0.3 per cent last month.
Economic reforms
While Draghi seeks consensus among the ECB's Governing Council for more measures, governments in the euro area are attempting to force through economic reforms that will foster growth.
French Prime Minister Manuel Valls unveiled a month-by-month map of measures last week that he says are designed to aid the nation's ailing economy, from reforms to the unemployment- benefit system to cutting government paper use. In Italy, the government won a key vote on labour reform this month.
Rating companies are not yet convinced. Fitch Ratings cut France's credit rating on December 12, citing the absence of a material improvement in the nation's public debt dynamics and slippage in the deficit targets. Standard & Poor's lowered Italy's assessment a week earlier amid sluggish growth prospects and high public debt.
