The eurozone ended 2025 with December's composite PMI of 51.5, which confirms that private sector activity continued to expand, completing the most substantial quarterly growth since the second quarter of 2023, yet the loss of momentum is increasingly evident. Growth has not reversed, but it has become shallower, with the pace now the weakest since September.

Demand dynamics explain much of the slowdown. New business continued to rise for a fifth consecutive month, though at a softer rate, reflecting weaker export demand and a sharper decline in manufacturing orders. Domestic services demand provided the main source of resilience. With demand pressures easing, firms made faster progress in clearing backlogs, while employment edged higher, signalling cautious confidence rather than aggressive expansion.

Inflationary signals remain mixed. Input cost pressures intensified to a nine-month high, pointing to persistent cost-side stress, yet firms showed restraint on pricing, leaving output charge inflation unchanged and historically subdued.

Looking ahead, sentiment has softened. Services firms are more guarded, while manufacturers appear increasingly optimistic. This divergence suggests the eurozone enters 2026 with growth still intact, but increasingly uneven and more vulnerable to external shocks and confidence effects. These updates take the RPI and RPI-P to minus 24, meaning that economic activities are lagging expectations in the eurozone.

The final composite is expected unrevised from the flash at 51.9 in the final report for December and down from 52.8 in November. The final services index is expected unrevised from the flash at 52.6 in the final report for December and down from 53.6 in November.

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.