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The Financial Express

Euro zone business growth at weakest pace in two years

| Updated: December 26, 2018 14:00:44


Euro zone business growth at weakest pace in two years

Euro zone business growth was at its weakest pace in over two years last month as a manufacturing-led slowdown showed further signs of spreading to the service industry.

The downbeat survey results will likely make disappointing reading for policymakers at the European Central Bank who intend to bring an end to their 2.6 trillion euro asset purchase program in less than a month, reports Reuters on Wednesday.

IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI), seen as a good guide to economic health, fell to 52.7 in November from October’s 53.1, its lowest since September 2016.

That was however above a 52.4 preliminary estimate and comfortably exceeded the 50 mark that separates growth from contraction.

“The final euro zone PMI for November came in higher than the flash reading but still only points to modest GDP growth of approximately 0.3 per cent in the fourth quarter, suggesting the region remains stuck in a soft-patch,” said Chris Williamson, chief business economist at IHS Markit.

A Reuters poll last month had predicted the bloc’s economic growth would bounce back somewhat and expand 0.4 per cent this quarter.

But purchasing managers were at their least optimistic for almost four years, suggesting little chance of improvement as 2018 draws to a close. The future output index fell in November to 59.5 from 60.5.

“Business optimism is running at its lowest since late 2014, adding to downside risks for growth as we move into 2019,” Williamson said.

Manufacturing activity also expanded at its weakest rate in over two years in November, a sister survey showed on Monday, and that softness is affecting the bloc’s dominant service industry.

The services PMI fell to a 25-month low of 53.4 from 53.7, knocked by slower growth of new business.

An index measuring overall new work for services firms fell to 53.4 from 53.9, its lowest in over two years. That was hurt by new export orders - which includes trade between member countries - contracting for a third straight month.

Adding to the gloomier outlook and concerns economic growth in the bloc is past its peak, other forward-looking indicators were also more downbeat.

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