Eurozone growth shudders on trade worries, French protests

Global trade war fears and disruptions caused by anti-government protests in France pushed business growth in the eurozone to a four-year low in December, an influential survey showed Friday, raising concerns the regions economy might stall.

The slide in IHS Markit's composite eurozone PMI, to 51.3 points from 52.7 points in November, came just a day after the European Central Bank pulled its extraordinary support that has stoked growth in the single currency area for the past three years.

"An undercurrent of slowing economic growth was exacerbated by protests in France and on-going weak demand for autos," said the financial data firm.

The survey for France showed business there had flipped into reverse, as the index plunged to 49.3 in December from 54.2 in November.

The country has been swept by opposition to fuel taxes that have snowballed into broad protests against President Emmanuel Macron's pro-business agenda and his style of governing.

"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," said IHS Markit's Chief Business Economist Chris Williamson.

"Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions within the euro area," he added.

The data point to a weak economic expansion of 0.3 percent in the final quarter of the year for the eurozone, he said.

But December's data alone show GDP growth is slowing to a 0.1 percent rate, and forward-looking information such as orders and sentiment show demand growth is stalling, he added.

The flash reading of Germany's composite PMI dipped by a tenth of a percentage point to 52.2.

Michael Hewson, chief market analyst at CMC Markets UK, said the survey results showed the risks of a recession in the eurozone have risen, and "have put into sharp contrast the ECB’s decision to stop its asset purchase program at the end of this month".

The ECB announced Thursday it would halt its purchases of eurozone bonds later this month, as expected.

The scheme -- also known as "quantitative easing" (QE) -- has seen the ECB buy 2.6 trillion euros ($3.0 trillion) of government and corporate debt since 2015 to ward off the threat of catastrophic deflation -- a crippling downward spiral of prices and activity.

"If ECB President Mario Draghi is correct as he said yesterday, that QE has been the only driver of recovery in certain parts of the euro area, surely you have to question the wisdom behind the decision to not only reduce but to end it," added Hewson.

On Thursday, the ECB trimmed its forecasts for eurozone growth, but the central bank still sees a modest expansion of 1.7 percent in each of the coming two years.

Disruptions to European car production helped push down growth last quarter, but the sector hasn't rebounded sharply, adding to worries about the economy AFP

Eurozone growth withered to 0.2 percent in the third quarter, but analysts had expected it to rebound, as the slowdown was due in part to exceptional factors such as a drop in auto sales and manufacturing due to the introduction of new pollution tests.

"Even though the PMI is still signalling output growth, the question is whether growth has even picked up at all despite one-offs affecting the third-quarter reading," said Bert Colijn, senior eurozone economist at ING Bank.

"While the ECB was relatively optimistic about the growth outlook yesterday, today’s PMI adds to the worries" about the eurozone economy, he added.

The main eurozone stock markets, which opened lower on disappointing Chinese economic data, shed more than one percentage point in morning trading. Meanwhile the euro slid to under $1.13.