Deja vu: Eurozone businesses back in decline as Covid cases jump
The Eurozone’s private sector slipped back into decline in October as coronavirus ripped through the region and new restrictions hit countries’ service sectors and wider economies, according to a new survey.
The preliminary IHS Markit Eurozone composite purchasing managers’ index (PMI) – which measures the health of businesses – dropped to 49.4 in October from 50.4 in September.
A score below 50 indicates decline, and October’s score was the lowest for four months. Data firm IHS Markit said a “steepening deterioration” in the dominant services sector outweighed a rise in manufacturing output.
“The Eurozone is at increased risk of falling into a double-dip downturn,” said Chris Williamson, chief business economist at IHS Markit.
Williamson said the survey “revealed a tale of two economies”. Manufacturers enjoyed the best growth since 2018, but new restrictions “took an increasing toll on the services sector”, especially hospitality.
Germany ‘the only bright spot’
He said this pattern caused a “stark” divergence between countries. “While Germany is buoyed by its manufacturing sector booming to a degree exceeded only twice in almost 25 years of survey history, the rest of the region has sunk into a deepening downturn.”
Coronavirus cases have surged over the last two months after countries lifted lockdowns to try to soothe battered economies.
Countries are regularly recording daily records. France reported more than 40,000 new cases yesterday. Italy, Germany and at least eight more countries also recorded record Covid infections.
Services sector output fell for the second month in a row, IHS Markit said. It dropped at the steepest rate since May.
Job cuts continued for the eighth successive month, although the rate of job losses slowed.
Inflows of new business fell and business optimism hit its lowest since May.
“Germany was the only bright spot,” IHS Markit said. France saw business activity fall for the second month running. Factory growth weakened on top of the decline in services.