Economic growth in the eurozone has slumped to levels last seen more than four years ago, after stagnation in Italy helped slow the rate of expansion to 0.2% in the latest quarter.

Figures from the EU statistics agency Eurostat showed a marked and unexpected slowdown in the third quarter of 2018, in the latest evidence of an easing of economic activity around the world since the start of the year.

Italy, which is at loggerheads with Brussels over its plans for a more expansionary budget, recorded zero growth in the first three months under its new populist government. The country is now at risk of a third recession in a decade.

The government in Rome wants to stimulate the economy – which is still 5% smaller than it was before the financial crisis – through tax cuts and spending increases, and to dismantle an austerity law forced on Italy by the European commission.

In an unprecedented move, Brussels told the Italian government it must reconsider its budget plans. But so far, Rome has shown no sign of making changes. On Tuesday, Italy’s deputy prime minister, Matteo Salvini, said the commission president, Jean-Claude Juncker, “could walk here from Brussels”, and insisted he would not dismantle his plans.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Aside from the problems in Italy, analysts said the drag on growth across the eurozone was the result of US trade hostilities with China and Europe, uncertainty over Brexit and political instability in countries including Brazil.

Economic growth in China, a major destination for European machine parts and cars, has already slowed this year, in part due to the prospect of a drop in trade with the US.

France, the second-biggest economy in the eurozone, grew 0.4% in the third quarter, twice as fast as in the previous three months. Despite the recovery, however, the country’s annual growth rate slipped from 1.7% to 1.5%.

Details of Germany’s recent performance have not yet been published, but the figure for the eurozone as a whole suggests Europe’s biggest economy also had a weak quarter.

Bert Colijn, an ING economist, called the eurozone growth figures a “massive disappointment” and saw little immediate prospect of better news. “While one-off factors have influenced the number, it does not seem that growth will return to previous rates any time soon,” he said.

“In Germany, disrupted car production will have dampened GDP growth significantly in the third quarter, weighing on the eurozone average.”

Eurozone growth has been boosted in the past four years by quantitative easing – the European Central Bank’s money-creation programme – and by the pickup in world trade.

Jessica Hinds of Capital Economics said the disappointing data would not prevent the ECB from calling an end to its bond-buying in December as planned, but would make the bank more cautious about raising interest rates.

The commission said the fall in GDP growth coincided with a drop in euro-area business confidence across industry, services and, particularly, retail trade.

Alastair Neame, a senior economist at the CEBR consultancy, said: “The eurozone economy looks set to weaken further as pressure mounts on two fronts. First, with global growth and trade volumes slowing, the positive contribution to growth from trade is looking less reliable, although French estimates of an improved trade balance provide some solace on that front.

“Second, the risk of economic disruption emerging closer to home is also growing. With Brexit negotiations still to be concluded, the UK’s imminent departure from the EU threatens supply chains that are deeply embedded across the Eurozone if a deal can’t be reached.”