The Eurozone economy ended the year on a suitably weak note, albeit rather stronger than originally thought. The 47.0 flash composite output index was revised up to 47.6 to stand level with its final November print but still some 2.4 points short of the 50-expansion threshold. The data duly extended the contraction seen since June.

The headline revision was largely due to services where the 48.1 flash sector PMI was boosted to 48.8, up from November's final 48.7 but still indicative of a fifth decline in activity in as many months.

Ominously, new business continued to fall and while by the least since July, the drop remained sizeable. External demand was particularly weak. Backlogs were pared again - as they have been almost every month since mid-2022 in an effort to support production - and although job shedding was only marginal, it was the joint fastest in three years. Business expectations about the year ahead improved to a 7-month high but remained well below the long-run average. Meantime, input cost pressures were the softest in four months but output price inflation climbed to a 6-month peak.

In terms of national composite output indices, the best performing member state was Ireland (51.5) which, alongside Spain (50.4), was the only country to post above 50. Italy (48.6), Germany (47.4) and, in particular, France (44.8) remained in recession territory.

Despite the positive headline revision, the final December results remain disappointing and probably mean the Eurozone economy closed out 2023 in mild recession. Manufacturing is clearly struggling badly but services are also in decline. Even so, the ECB will be wary of lingering inflation pressures and any hopes for a cut in official interest rates this quarter are likely to prove premature. Today's report lifts the Eurozone RPI to 5 and the RPI-P to 6 meaning that the region's economic activity in general is running just marginally ahead of forecasts.

No revisions are expected leaving the composite output index at 47.0, down from November's final 47.6, and the services PMI at 48.1, down from 48.7.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.