Europe’s economy starts 2019 with a whimper
The eurozone is set to cool further as the year wears on
Europe’s flagging economy got off to a weak start in 2019, as Italy showed few signs of emerging from recession and the uncertainty around Britain’s exit from the European Union dragged on U.K. growth. The eurozone economy slowed more sharply than expected in 2018 and seems set to cool further this year. In addition, decelerating Chinese growth means the outlook for the global economy has become a big worry for investors and policy makers.
Survey data released Tuesday also indicated that France’s output declined, while in December retail sales across the eurozone had their steepest monthly fall since mid-2011, according to figures released by the European Union’s statistics agency.
Italy’s economy contracted for the second straight quarter in the three months through December, placing the country in a technical recession, figures released last week showed. That decline likely continued through Janual, a survey of businesses released Tuesday by data firm IHS Markit indicated, as the country’s composite Purchasing Managers Index fell to 48.8 from 50.0 in January. A reading below 50.0 points to a decline in activity.
“The PMI data shows an Italian economy that is undergoing a sustained slowdown,” said Amritpal Virdee, an economist at IHS Markit. “This bodes ill for the rest of 2019 as the Italian government tries to stimulate economic growth.”
IHS Markit said the composite PMI for France fell to 48.2 from 48.7 in December, although there were pickups in Germany and Spain that ensured activity across the whole of the eurozone continue to rise, although very marginally.
Much of the eurozone’s weakness in 2018 was down to cooling demand for its exports, but there are also signs that demand for goods and services within the currency area is faltering. Eurostat said the vol- ume of retail sales was1.6% lower in December than a month earlier, the largest fall since May 2011, when the currency area was mired in its government debt and banking crises.
Beyond the eurozone, business surveys also pointed to fresh weakness in Europe. The U.K.’s all-sector PMI fell to 50.3 from 51.5 in December, indicating the economy stalled at the start of the year. It was the lowest reading since August 2016, two months after British voters opted to leave the European Union. How Britain will do that has still to be decided, with the departure scheduled for the end of March.
Nissan Motors in recent days said it had decided to manufacture its X-Trail model in Japan rather than Sunderland in the U.K. in part because the continued uncertainty around the U.K.’s future relationship with the EU “is not helping companies like ours to plan for the future”.
British Prime Minister Theresa May is seeking to renegotiate the U.K.’s divorce deal with Brussels to reach an agreement that would avoid a hard border on the island of Ireland but allow the whole of Britain to exit the customs union with EU. European leaders have said the withdrawal agreement is not up for negotiation.
“Brexit uncertainty continues to be at the heart of the malaise as clients delayed orders and consumers were deeply reluctant to spend under the continuing cloud of hesitation, indecision and ambiguity,” said Duncan Brock, a director at the Chartered Institute of Procurement & Supply, whose members contributed to the surveys.