MNI 5 THINGS: Eurozone Growth At Slowest In 4 Yrs: IHS Markit

     LONDON (MNI) - It was a poor end to 2018 for the Eurozone, with the flash

composite PMI reading coming in at 51.3, down from 52.7 in November, the lowest

in over four years. 

     One-off factors played a major role in the softening (see France below),

but weakness across Germany, alongside deteriorating Eurozone fundamentals,

suggest economic growth across the bloc is slowing.

     Below are five key points from the data, published Friday:

     Eurozone Growth Slows to 4-Year Low: December's flash PMI painted a picture

of an economy losing momentum. The 1.4-point fall in the flash composite PMI to

51.3, a 49-month low and below market consensus, was driven by a 0.4-point

decline in the manufacturing index to 51.4 and a 2.0-point fall in its services

counterpart to 51.4. According to IHS Markit, the composite reading is

consistent with growth of just 0.1% in Q4 -- it averaged 0.7% across the whole

of 2017.

     Fundamentals Look Weak: There was a "near-stalling" of new work in

December, according to HIS Markit. New export orders fell by the steepest margin

since the indicator's inception four years ago while lacklustre demand meant

firms ate into unfinished orders for the first time in over four years. As such,

hiring sentiment came under pressure with the monthly gain in employment the

smallest for two years. Firms have been hit by a multitude of headwinds, both

domestic and external, and with many of these expected to remain in play over

the coming months, the near-term outlook remains dreary.

     Geopolitical Environment Unsurprisingly Weighs on Outlook: The global

economic environment is starting to take its toll on the PMIs with further

uncertainty from Brexit and trade wars providing justified cause for concern. As

Chris Williamson, Chief Business Economist at IHS Markit said "Companies are

worried about the global economic and political climate, with trade wars and

Brexit adding to increased political tension within the euro area."

     'Yellow Vests' Rattle France: As one would have expected, the riots and

protests in France impeded business and travel and adding to an already weak

demand environment, business activity in France fell for the first time in

two-and-a-half years. The country's measures of manufacturing and services

activity receded to levels below the 50-neutral mark, to 47.7 and 49.6

respectively -- 44 and 34-month lows respectively. Having supported private

sector growth up in recent months, the moderation across the service sector

presents significant downside risks to France's Q4 growth prospects.

     Germany Does Little to Help Unflattering Reading: In Germany, the outlook

remained bleak with the flash reading coming in below market expectations.

Output growth hit its slowest rate for four years while, more alarming, new

orders placed at German factories declined for a third consecutive month,

dropping at the steepest rate for just over four years. Anecdotal evidence also

pointed to a drop in trade to China, driving the fall in new export business for

a fourth consecutive month.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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