According to the report from IHS Markit, Eurozone business activity came close to stabilising in December as stronger manufacturing output growth helped to counter a further drop in service sector activity. Encouragingly, future output expectations jumped to a 32-month high, as prospects brightened amid recent news on vaccine developments.

The flash Eurozone Composite PMI rose from 45.3 to 49.8 in December, registering a marginal drop in business activity after a steep decline in November. The improvement means the PMI has averaged 48.4 in the fourth quarter. Although down from 52.4 in the third quarter, the fourth quarter average is well above that seen in the second quarter (31.3), suggesting that the economic impact of the second waves of virus infections has been far less severe than the first wave.

Although manufacturing output growth accelerated in December, having slowed in November, the service sector saw output contract for a fourth successive month, albeit with the rate of decline easing markedly to the slowest since September as fewer companies reported output to have been hit by coronavirus disease 2019 (COVID 19) lockdown restrictions compared to November.

Inflows of new orders rose marginally and for the first time since September, boosted by an increased rate of growth of new orders in the manufacturing sector and a substantial slowing in the rate of loss of new business in the service sector compared to that suffered in November.