December 4, 2019 / 7:22 PM / 4 days ago

Euro zone business growth near-stagnant, some hopeful signs: PMI

LONDON (Reuters) - Euro zone business activity stayed near stall speed last month, with manufacturing seemingly continuing to act as a drag on the bloc’s dominant services industry as well as the economy as a whole, a survey showed.

FILE PHOTO: The financial district with the headquarters of Germany's largest business bank, Deutsche Bank (C), is photographed on early evening in Frankfurt, Germany, January 29, 2019. REUTERS/Kai Pfaffenbach

Despite some optimistic signs in Wednesday’s survey, that picture is likely to disappoint policymakers at the European Central Bank who in September relaunched a 2.6 trillion euro asset purchase program designed to stimulate growth and inflation.

IHS Markit’s final euro zone composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, held steady last month at October’s 50.6.

That beat a preliminary estimate of 50.3 but remains uncomfortably close to the 50 mark separating growth from contraction.

The headline figure “still indicates a near-stagnant economy,” said Chris Williamson, chief business economist at IHS Markit. The data pointed to fourth quarter GDP growth of 0.1%, with manufacturing continuing to act as a major drag.

“Worryingly, the service sector is also on course for its weakest quarterly expansion for five years, hinting strongly that the slowdown continues to spread,” he said.

A Reuters poll last month had predicted growth of 0.2% this quarter.

Offering glimmers of hope, an index measuring demand climbed to the breakeven mark having spent two months below it, firms increased the pace of hiring and optimism was at a four-month high. The new business index was 50.0 compared to October’s 49.6.

“New orders have not shown any growth since August, underscoring the recent weakness of demand, with sharply declining orders for manufactured goods accompanied by substantially weaker gains of new business into the service sector,” Williamson said.

Overall services industry activity stuttered. Its PMI dipped to 51.9 from 52.2, although edging above a 51.5 flash reading.

Still, reflecting some level of increased optimism, firms increased headcount at a faster rate. The employment index nudged up to 53.2 from 53.0.

Reporting by Jonathan Cable; editing by John Stones

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