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- Eurozone services PMI showed mixed performance in December, with some countries staying resilient while others struggled.
- Germany and Spain performed well in the sector following strong business activity and a strong labor market.
- The UK and France continue to underperform, weighed down by high inflation, political challenges, and weak overseas demand.
Services PMI data in the Eurozone showed a mixed picture in December. Some countries continued to expand while others lost momentum.
The data showed how different economies across the Eurozone performed from each other, with pressures appearing from labor shortages, high prices and political uncertainty.
Britain’s Services Sector Ends Year on Weak Note
The UK’s services sector, which plays a major role in its economy, finished 2025 on a poor note. The data showed that consumers are facing higher prices after the increased costs passed on by companies. Services PMI remained in expansion territory, coming at 51.4, showing a slight increase from November’s figure of 51.3, but fell short of estimates. ⁽¹⁾
The data showed weak economic indicators surrounding Finance Minister Rachel Reeves’ Autumn budget on November 26th. That budget included tax increases totaling £26 billion, though most implementations were postponed. The UK economy contracted by 0.1% MoM in October, with the Bank of England forecasting a flat reading for Q4 GDP.
The Bank of England cut interest rates last month to 3.75% but also stated that high services inflation limits its ability to cut more. The UK’s minimum wage is expected to increase by 4.1% in April 2026.
The survey suggested business optimism was recovering following a period of damaging speculation about Reeves’ November budget. Respondents noted improvements in consumer confidence and increased business investment. Exports rose for the first time since August. ⁽²⁾
Despite new orders rising in December after facing a decline in November, concerns are rising about the UK’s economic outlook, rising costs and weak demand from overseas. Hiring continued to fall but at a slower pace than in November.
Germany’s Services Sector Grows but Faces Slowdown Amid Cost Pressures
Germany’s services sector continued to expand in December, but at a slower pace due to a slowdown in business activity. The HCOB Germany services PMI came in at 52.7, down from November’s figure of 53.1, marking a three-month low but keeping within expansion territory. ⁽³⁾
Employment in services grew modestly for three consecutive months. Companies have worked through their backlogs at the quickest rate since September. Both input costs and output charges increased at faster rates. Wages continued to be the primary driver of rising costs, and businesses managed to pass on some of these expenses to their customers. ⁽⁴⁾
The cost challenges German services are facing could persist. Demographic shifts and resulting labor shortages across many sectors remain problematic, even as the broader economy shows weakness.
Business confidence fell to its lowest point since April. Concerns centered on German industry’s competitiveness, geopolitical tensions, and policy shifts. ⁽⁵⁾
Spain Records Strongest Growth of the Year
In Spain, the services sector ended 2025 with its strongest monthly expansion throughout the whole year. The services sector came in at 57.1 in December, an increase from November’s figure of 55.6 due to rising sales and increased hiring. The index has stayed above the 50-growth marker for 28 straight months. ⁽⁶⁾
Robust sales and strong business activity, especially from European markets, have supported the expansion. Companies increased their hiring at a strong pace.
However, inflationary pressures still linger, with production costs rising to their highest level since September due to higher supplier charges, energy prices, and wage pressures. Service companies reacted to these factors by raising prices. ⁽⁷⁾
The strong services data showed a divergence between the sectors, where the manufacturing sector showed a contraction of 49.6. Despite the strong data, inflation in the services sector remains a concern for the European Central Bank. ⁽⁸⁾
France Stagnates in December
France’s services sector stagnated in December, completing a flat fourth quarter. New business and employment levels showed no change.
The HCOB France Services final PMI dropped to 50.1 in December from 51.4 in November, also coming in weaker than expected. ⁽⁹⁾
France’s private sector ended the year in stagnation. The year was marked by uncertainty, including pressure from US trade policy and Germany’s economic slowdown. More importantly, France’s fragile domestic political crisis weighed on performance.
Alongside weaker activity, new orders disappointed, particularly export orders, with panelists citing subdued demand from the US market.
