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IHS: Eurozone Q4 output growth at 6-year low as manufacturing woes worsen

The eurozone's overall business activity growth nearly stalled for the third consecutive month in December, concluding the fourth quarter with the weakest growth in six years, preliminary data from IHS Markit showed.

The flash eurozone composite purchasing managers' index came in at 50.6 in December, unchanged from November, but higher than the Econoday consensus estimate of 50.2. A reading below 50.0 indicates contraction.

Output growth in the fourth quarter was the weakest since the second half of 2013.

Manufacturing output dropped at the fastest rate since October 2012, as the relevant PMI fell to 45.9 from 47.4, marking the 11th straight monthly drop. Meanwhile, the eurozone services PMI improved to 52.4 from 51.9.

"While service sector growth remains encouragingly resilient in the face of the manufacturing downturn, any further softening of the labor market could cause weakness to spill over," Chris Williamson, chief business economist at IHS Markit, said. He added that the bloc has been stuck in "crawler gear" for four consecutive months, pointing to a quarterly GDP expansion rate of just 0.1%.

New orders rose for the first time since August, but employment growth was the slowest since November 2014.

Within the bloc, the flash German Composite Output Index remained unchanged at 49.4 in December. The Econoday consensus estimate was for the index to emerge out of contraction territory, with a 50.1 reading. Growth in the services sector was offset by a deeper downturn in the manufacturing sector, whose relevant PMI fell to 43.4 from a five-month high of 44.1 in November.

Germany's business sentiment rose to the highest level in six months since June and new orders fell at the slowest rate since July.

The preliminary French Composite Output Index reading ticked down to 52.0 in December, in line with market estimates, from 52.1 in November. Business expectations in France declined to a six-month low.

The latest PMI numbers largely reflect the need for another ECB easing package in March 2020, wrote Nordea Markets chief analyst Anders Svendsen and analyst Inge Klaver.

The ECB held its key rates at the first monetary policy meeting under new President Christine Lagarde, who plans to begin a strategic review of the central bank's monetary policy in January 2020.