Euro-Area Firms Despondent With Business Growth at Four-Year Low

(Bloomberg) -- Euro-area companies are bracing for subdued economic momentum in 2019 after activity slipped to a four-year low at the end of last year.

Growth in manufacturing and services slowed more than initially reported in December -- weighed down by public protests in France, Germany’s continued struggles in the car industry, and renewed weakness in Italy. Composite gauges for output expectations and new orders were the worst since late 2014.

Euro-Area Firms Despondent With Business Growth at Four-Year Low

“Companies are not anticipating any imminent revival in demand,” said Chris Williamson, chief business economist at IHS Markit. “Worries reflect multiple headwinds from trade wars, Brexit, heightened political uncertainty, financial-market volatility and slower global economic growth.”

The European Central Bank acknowledged all those risks last month when it downgraded its 2019 forecast for the expansion in the 19-nation euro area. Still, policy makers decided to end asset purchases, pushing ahead with plans for a gradual reduction in monetary stimulus.

That was before data showed growth slowing further. IHS Markit’s Purchasing Managers’ Index for factories and services stood at 51.1 in December, down 7 points over the course of last year. While the readings suggest the economy grew about 0.3 percent last quarter, the momentum was only half that pace last month.

One mildly encouraging spot of news came from the Italian survey, which indicated that private-sector activity unexpectedly stopped shrinking in December. The PMI reading was 50, the dividing line between growth and contraction.

Still, in a warning for governments facing the rise of populist parties and with European Parliament elections this year, a gauge of euro-area job growth hit a two-year low.

“The euro-zone economy moved down another gear,” Williamson said. “Employment growth has already taken a knock as companies take a more cautious approach to hiring in the face of weaker order books.”

©2019 Bloomberg L.P.