"Eurozone ends 2024 with growth in services and persistent economic challenges."

The conclusion of 2024 has brought a mixed economic outlook for the eurozone. In December, the region's economic activity showed signs of weakness, marking a new decline in the composite PMI, which stood at 49.6 points, a slight increase from the 48.3 points of the previous month. However, these numbers still indicate a contraction in economic activity, as any figure below 50 signals a decrease. The services sector, on the other hand, has performed more optimistically, with the PMI reaching 51.6 points, compared to 49.5 in November. This growth suggests that, at least in this sector, economic activity is experiencing a rebound, which could provide relief to a situation that is generally described as "fragile." Despite this increase in the services sector, the overall situation in the eurozone remains concerning. The report highlights that activity levels have decreased due to ongoing declines in new orders and employment, suggesting that businesses are facing significant challenges. Inflation has also begun to exert pressure on the economy, adding an additional layer of uncertainty to an already unstable landscape. A more detailed analysis reveals that not all eurozone countries are experiencing the same trend. Germany, France, and Italy recorded reductions in their business activity in December, with France being the most affected at a PMI of 47.5 points. Germany stood at 48 points, indicating a notable contraction, while Italy recorded a marginal decline, reaching a PMI of 49.7. In contrast, Spain has managed to break free from this negative trend, showing dynamism in its private sector that places it at highs not seen in nearly two years. This growth in the Spanish PMI is a ray of hope amid a complicated context. The improvement in economic activity in Spain and Ireland underscores that, although the eurozone as a whole faces challenges, there are individual economies that are showing resilience. An analysis by the chief economist of Hamburg Commercial Bank, Cyrus de la Rubia, suggests that, while the December data is not a solid foundation for anticipating a boom in the services sector in 2025, there are signs that the decline in new orders has become less pronounced. This slight optimism suggests that businesses may be beginning to adapt to market conditions. De la Rubia also points out that companies in the services sector are not as exposed to the threats of U.S. tariffs as manufacturers are. This could mean that the services sector could act as a buffer for the economy in the event that industrial weakness continues to affect the region in the coming year. However, not all news is positive. The analysis also indicates that inflation in the services sector remains at concerning levels, driven by rising costs and the passing of these costs onto selling prices. This situation presents a significant challenge for monetary policy in the eurozone. Given the current context, the European Central Bank will need to proceed with caution. De la Rubia suggests that only small interest rate cuts should be considered during the first quarter of 2025. This prudent strategy may be necessary to navigate an economic environment that remains uncertain and full of challenges. In summary, the economic situation in the eurozone at the end of 2024 reflects contrasts. While in some countries business activity continues to decline, others, like Spain, show signs of recovery. With inflation and other factors at play, the path to sustainable growth appears fraught with obstacles, and caution emerges as an essential virtue for the coming months.