Euro falls as eurozone business growth hits four-year low after France protests and Brexit uncertainty

Joe Curtis
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France's yellow vest protests contributed to a slowdown in business growth (Source: Getty)

Eurozone business growth plummeted to a four-year low in December, according to a closely-followed measure of economic activity, hitting the euro as markets reacted today.

The “yellow vest” protests in France and ongoing weak car demand exacerbated a widespread economic slowdown, IHS Markit’s purchasing managers’ index (PMI) showed this morning.

The index’s eurozone composite PMI showed that business growth fell to 51.3 in December, down from 52.7 last month and the lowest since November 2014.

The euro fell against the dollar from 1.135 at 8am to 1.129 after the news.

Output growth experienced a “near-stalling” in the month, while new export orders fell for the third month in a row, at its steepest decline in four years.

Job creation sank to a two-year low as the low number of new orders put firms off hiring, while business optimism collapsed.

Growing political uncertainty amid Brexit, tighter financial conditions and growing concerns over global trade contributed to the slowing growth.

Meanwhile, the French protests that resulted in President Emmanuel Macron hiking up the minimum wage caused the first fall in French business activity in two-and-a-half years as business and travel were both disrupted.

Both manufacturing and services output fell in the month, IHS Markit added.

In Germany, output also sank to a four-year low, though the service sector grew slightly faster than manufacturing.

The latest stats follow a slowdown in eurozone growth in the third quarter, when it also hit a four-year low.

Chris Williamson, chief business economist at IHS Markit, said: “The eurozone economy saw a disappointing end to 2018, with growth slowing to the weakest for four years.

“While some of the slowdown reflected disruptions to business and travel arising from the ‘yellow vest’ protests in France, the weaker picture also reflects growing evidence that the underlying rate of economic growth has slowed across the euro area as a whole.

“Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions within the euro area. The surveys also point to further signs that the struggling autos sector continued to act as a drag on the region’s economy.

“Forward-looking indicators such as new orders and future expectations remaining subdued suggest that demand growth is stalling, adding to downside risks to the immediate outlook.”