Europe economic data points to disappointing year end

Eurozone economic activity softened more than expected last month, according to surveys from IHS Markit, including disappointing services data on Friday.

The purchasing managers' index for the eurozone services sector fell to 51.2 in December from 53.4 the month before, slightly short of the 51.4 that economists had predicted.

German and French services PMIs both declined more than expected, sending the composite PMI in France into contraction territory at 48.3 from 54.2 in November, as the yellow vest protests impact the economy.

The weakness from France and Germany more than offset an improved performance from Italy and Spain unexpectedly holding steady.

As a result, the composite PMI that also includes the manufacturing and construction PMI surveys, fell to 51.1 in December from 52.7 in November, below the consensus and initial estimate of 51.3.

PMI data continues to signal that eurozone economic growth is slipping and sliding, said economist Claus Vistesen at Pantheon Macroeconomics, adding that Germany's data was a signal of "broad-based weakness amid already sluggish manufacturing... but we are sceptical that the German services index can be trusted. It has made wild moves before without any discernible impact on the trend in domestic demand for services".

After the improvement in Italy, where the composite PMI edged up to 50.0 from 49.3 in November amid small increases in both the services and manufacturing PMIs, he said: "We need more data to confirm a turning point, but we’re hoping that these data mark a temporary bottom."

In other data released in Europe on Friday, Germany's unemployment rate was unchanged at 5.0% in December, in line with market expectations.

Jobless claims fell 14,000 last month, following November's 16,000 decline, marginally better than consensus, while the number of job openings fell month-to-month for the third month running.

This indicates that firms’ demand for new workers is waning at the margin, said Vistesen. "This signal is consistent with the survey data, and the significant slowdown in economic growth in the second half of 2018. We suspect that the otherwise solid falling trend in claims will ease too in coming months."