Next week sees the release of flash Eurozone PMI data on thesame day that the European Central Bank's Governing Council meetsto decide on monetary policy. The policy meeting and data will beeyed for insights into whether the recent deterioration inperformance of the eurozone economy has persisted at the start of2019, and whether the central bank may adjust its policy stance andguidance.
The ECB ratcheted up its hawkish rhetoric in 2018 after theeconomic data showed a surprisingly strong start to the year, onlyto see the numbers deteriorate as the year proceeded. The worseningeconomic trends failed to prevent the ECB going ahead with aplanned ending of its quantitative easing programme in December,but with the latest PMI survey data indicating the slowest rate ofeurozone business growth for over four years alongside a markedeasing in price pressures, policymakers are at least starting toacknowledge increased downside risks to the economy.
The headline IHS Markit Eurozone Composite PMI®fell from 52.7 in November to 51.3 in December, its lowest sinceNovember 2014. The output index is consistent with a quarterly GDPgrowth rate of just 0.1% in December alone.
A PMI-based 'price pressures' gauge, an inflation indicatorbased on input costs and supplier delivery times (the latter beingindicative of capacity utilization), meanwhile fell from 60.5 to57.9, its lowest since October 2016.