December Flash PMI: Stagflation Fears At Forefront

The Eurozone December flash PMI was unsurprisingly weaker than expected, following the German and French prints earlier this morning. Services were 48.1 (vs 49.0 cons; 48.7 prior) while manufacturing was 44.2 (vs 44.6 cons; 44.2 prior). The release notes that "the rest of the eurozone as a whole recorded a more muted decline by comparison to the falls seen in France and Germany".

However, the combination of higher selling prices and weaker order books keep stagflation fears at the forefront. Key notes from the release are:

• "Eurozone companies recorded a slowing in the rate of increase in input costs, which registered the smallest monthly increase since August".
• "While input cost inflation cooled in December, average selling prices rose at an increased rate". Services inflation was the highest since July.
• "Employment fell for a second consecutive month as companies scaled back capacity in line with the weakened demand environment"…"Service providers meanwhile continued to pull back on their hiring, resulting in only a very modest expansion of their staffing levels".
• "Manufacturing continued to lead the downturn, accompanied by a steepening drop in service sector output".
• "The overall reduction in business activity was again a reflection of deteriorating order books"…"Backlogs of work consequently also fell sharply".
• There was an improvement in the year-ahead outlook for manufacturing firms, while service sector sentiment remained at the lowest levels for a year.