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Eurozone Factory Sector Growth Slows Less Than Expected; Lowest Since Aug 2016

Eurozone's manufacturing growth slowed less-than-expected in November, amid marginal growth in output and weak business confidence, and was the lowest since August 2016, final data from IHS Markit showed on Monday.

The manufacturing purchasing managers' index fell to 51.8 from 52 in October. The flash reading was 51.5.

A PMI reading above 50 suggests growth in the sector, which expanded for a sixty-fifth month running.

Investment goods sector led the slowdown, while consumer goods producers reported solid growth, the survey data showed.

Germany's manufacturing PMI fell to a 31-month low of 51.8, which was higher than the flash reading of 51.6.

France's manufacturing PMI dropped to a 26-month low of 50.8, which was slightly above the initial score of 50.7.

Italy's factory sector contracted with the PMI sliding to a 47-month low of 48.6, while Spain's manufacturing sector expanded further with the index rising to a three-month high of 52.6.

Manufacturing growth improved in the Netherlands, Austria and Ireland.

The survey data suggest that production could act as a drag on the eurozone economy in the fourth quarter, Chris Williamson, Chief Business Economist at IHS Markit, said.

"The darker outlook is linked to trade wars and tariffs as well as intensifying political uncertainty and has led to increased risk aversion and a commensurate cutting back on expenditure, notably for investment," Williamson said.

"Hopes that the soft patch may prove short-lived are countered by business optimism about prospects for the year ahead remaining among the gloomiest seen since the sovereign debt crisis in 2012, suggesting companies are bracing themselves for further weak demand in the coming months," the economist added.

Further, the PMI surveys indicate that households could rein-in spending if companies continue to pull-back on their hiring, adding to downside risks to the outlook, Williamson said.

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