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Eurozone business activity growth slows to 4-year low in December


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Eurozone business activity growth slows to 4-year low in December

Business activity growth in the eurozone decelerated to its lowest level in more than four years as business optimism declined, job creation fell to a two-year low and new business inflows almost came to a standstill.

The IHS Markit flash eurozone PMI composite output index stood at a 49-month low of 51.3 in December, down from 52.7 in November and below the Econoday consensus estimate of 52.5.

The eurozone manufacturing PMI dropped to a 34-month low of 51.4 in December from 51.8 a month ago. The services PMI activity index declined to a 49-month low of 51.4 from 53.4 in the prior month.

"While some of the slowdown reflected disruptions to business and travel arising from the 'yellow vest' protests in France, the weaker picture also reflects growing evidence that the underlying rate of economic growth has slowed across the euro area as a whole," said Chris Williamson, chief business economist at IHS Markit.

New export orders slipped for the third consecutive month, registering the steepest fall in more than four years. Growth in new work also rose at the slowest pace since December 2014, thereby leading to a fall in backlogs for the first time in almost four years.

Monthly job growth was the slowest in two years as firms were cautious about hiring new staff owing to the reduced inflow of new work. Factory optimism declined to a six-year low, and output increased at the slowest rate in four years.

"Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions within the euro area," Williamson said.

The flash France composite output index fell to 49.3 in December from 54.2 in November, signaling the first contraction in private sector output in 30 months. Manufacturing output and service sector activity growth declined to 44-month and 34-month lows, respectively, as businesses faced widespread disruption due to the "yellow vest" protests.

In Germany, the flash composite output index declined to a 48-month low of 52.2 in December from 52.3 in November. Service sector activity growth eased to a seven-month low, while manufacturing output rose to a three-month high.

"Today's flash PMI numbers from France and Germany for December have put into sharp contrast the European Central Bank's decision to stop its asset purchase program at the end of this month," Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note.