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TOP NEWS: Eurozone Services, Composite PMIs At 4 Year Low in December

LONDON (Alliance News) - The service sector in the eurozone grew at a slower rate in December, ...

Alliance News 4 January, 2019 | 10:06AM
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LONDON (Alliance News) - The service sector in the eurozone grew at a slower rate in December, pulling the currency bloc's composite output reading down toward no-growth, according to purchasing managers' index scores released by IHS Markit on Friday.

The IHS Markit eurozone PMI composite output index moved closer to the 50.0 no-change mark in December. Registering a final reading of 51.1, down from 52.7 in November and lower than the earlier flash estimate of 51.3. The index was at its weakest level for over four years.

The slowdown in growth during December in part reflected lower activity in France, where the "gilets jaunes" protests reportedly led to a first fall in economic output for two-and-a-half years.

Growth tended to weaken elsewhere, led by Germany which registered its weakest result for five-and-a-half years, according to IHS Markit. Italy bucked the broader downward trend, though output merely stabilised following two months of contraction.

The manufacturing and service sectors registered broadly similar modest growth during December. Goods producers recorded a slightly better increase in production than in November, IHS Markit said, but this was only achieved via a reduction in work outstanding and an accumulation of warehouse inventories rather than any improvement in demand.

New orders received by manufacturers deteriorated to the greatest extent in over four years, it said. With inflows of new business to service providers rising only modestly, composite data showed the weakest growth in new work since the end of 2014.

Business confidence continued to soften in December, slipping to its lowest level since October 2014. In line with recent surveys, political and economic uncertainties relating to global trade and Brexit weighed on expectations. Sentiment remained especially low in Germany, the weakest since October 2014.

Meanwhile, the eurozone services PMI score declined for a third successive month during December to hit its lowest level in more than four years. After accounting for seasonality, the index recorded 51.2, down from November's 53.4 and indicative of modest growth.

French services activity fell for the first time since June 2016, reflecting a disruption to activity from the recent protests. Meanwhile, growth in Germany was the slowest since September 2016 and activity in Italy rose only marginally. More positively, Spanish service sector growth was unmoved at a robust rate.

New business volumes in the services economy increased at the weakest rate for four years in December, IHS Market said. Despite evidence of lower fuel and energy costs, input price inflation remained high during December. Higher labour costs were a key source of inflation, according to service providers.

Business confidence, amongst service providers, continued to deteriorate at the end of 2018. Latest data showed that sentiment was the lowest recorded by the survey for four years, reflecting weaker confidence in France and Germany.

Chris Williamson, chief business economist at IHS Markit commented: "The eurozone economy moved down another gear at the end of 2018, with growth down considerably from the elevated rates at the start of the year. December saw business activity grow at the weakest rate since late-2014 as inflows of new work barely rose. Levels of unfinished business are now falling for the first time in nearly four years as previously-received orders are not being fully replaced with new work."

Williamson added: "Importantly with expectations of output dropping to the lowest for over four years, companies are not anticipating any imminent revival in demand. Worries reflect multiple headwinds from trade wars, Brexit, heightened political uncertainty, financial market volatility and slower global economic growth."

By Alessandro Albano; alessandroalbano@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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