Italy’s Broadening Slump Weighs Down Euro-Area Growth Momentum

(Bloomberg) -- A manufacturing and export-led slump in Italy’s economy spilled into services at the start of the year, aggravating an already fragile economic situation in the euro area.

Business activity among Italian services providers shrank in January and forced companies to reduce headcount for the first time in more than two years, a Purchasing Managers’ Index showed on Tuesday. Firms cited weakening domestic demand and a decline in export orders as reasons for the job cuts.

The euro traded at $1.1420 at 11:15 a.m. Rome time, down 0.2 percent.

While the Italian economy, which slipped into recession at the end of 2018, marks a particularly weak spot in the region, cracks have appeared across the 19-nation bloc.

Retail sales slumped 1.6 percent in December, the most in more than seven years, the latest indication that uncertain economic prospects are weighing down growth momentum.

Germany’s industry has been deeply scarred by carmakers’ struggles with new emissions tests and waning global trade. In France, consumer spending took a hit from violent protests against the government.

Activity in French services has declined rapidly in the past two months, with the January PMI indicating the worst contraction in almost five years. New business fell for a second month and job creation slowed.

For the euro area as a whole, the composite reading of manufacturing and services was revised up to 51 compared with an initial estimate of 50.7. But the survey still signals “only weak growth in business activity,” IHS said.

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