PMI shows that business activity in the Eurozone has slowed due to Covid restrictions hitting the service industry

PMI shows that business activity in the Eurozone has slowed due to Covid restrictions hitting the service industry



A closely watched survey showed that business activity in the Eurozone slowed down after restrictions on the rising coronavirus infection hit the service industry, and there are signs that the supply bottleneck that hinders manufacturers has eased.

The Eurozone Comprehensive Purchasing Managers Index released by IHS Markit is a monthly survey that grasps the pulse of business activity. The decline in December was slightly higher than the 9-month low of 53.4 expected by most economists and lower than the 55.4 last month.

Several countries have recently announced new coronavirus containment measures, including Germany, Italy, Austria and the Netherlands. These restrictions have reduced passenger flow in the service industry, especially in restaurants and shops.

Although the PMI score of the service industry in the region is still higher than 50, indicating that the activity level of most companies is still higher than a month ago, the slowdown is greater than that of the manufacturing industry.

Eurozone manufacturers report an improvement in the global economy Supply chain issues This led to a backlog of factory orders, port congestion and material shortages, helping them report their largest production increase since September.

Ricardo Amaro, senior economist at Oxford Economics, said: “This is consistent with our assessment that the supply bottleneck may have peaked, but the important caveat is that the Omicron variant brings some downside risks in this area.”

The increase in input costs and selling prices is not as large as last month, but IHS Markit said they are still growing at the second fastest rate in survey history. It said that higher transportation costs, energy prices and staff costs have once again increased inflationary pressures.

Chris Williamson, chief business economist at IHS Markit, said: “The Eurozone economy is being hit by Covid-19 again, and rising infection levels have particularly curbed the growth of the service industry.”

But he added that the easing of tight manufacturing supplies was “encouraging” and the survey’s output indicator rose to a three-month high.

German companies reported stagnant activity and new orders for goods and services fell for the first time since June 2020, as the country’s PMI score fell to an 18-month low of 50.

The main reason for the slowdown was the German service industry, whose PMI index fell below 50 for the first time in eight months, indicating a decline in activity compared to a month ago and offsetting the recent rebound in production by the country’s manufacturers.

Deutsche Bank economists predicted this week that Germany will enter a technical recession this winter, as the restrictions of the coronavirus, high inflation and supply bottlenecks will hit Europe’s largest economy in the next two quarters.

The situation is brighter in France, where companies report only a slight slowdown in growth. According to IHS Markit, “the relatively resilient service industry has helped offset the impact of the second decline in manufacturing output in the past three months”.

Most economists still expect the overall Eurozone economy to continue to grow in the fourth quarter, although the growth rate is significant Slower, And the rapid spread of the Omicron coronavirus variant has raised doubts about the prospects for the first quarter of next year.

Carsten Brzeski, head of macro research at ING, said: “The latest wave of viruses is suppressing a strong recovery, but the medium-term economic outlook is still relatively mild.” He added that the signs of price pressure relief are “the first sign of caution, indicating the current situation. High inflation may be temporary to a large extent.”


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