Tough Omicron curbs whack European economy as growth dips to nine-month low

Reimpositions of tough measures to curb the spread of coronavirus across Europe whacked the bloc’s economy last month, reveals a closely watched survey released today.

The Eurozone economy grew at the slowest monthly pace in nine months in December, according to IHS Markit’s composite purchasing managers’ index (PMI).

December’s reading fell to 53.3 from 55.4 in November, the weakest level since March 2021.

Countries across Europe have responded strongly to a sharp rise in Covid-19 infections triggered by the Omicron variant sweeping across the area.

The Netherlands imposed a full-blown lockdown in December, while Austria imposed tough curbs on daily life on unvaccinated citizens. Germany, the Eurozone’s largest economy, has also clamped down hard on soaring Covid-19 cases.

Restrictions on economic activity and greater caution exerted by consumers in the face of soaring infections hit the Eurozone services industry hard, according to analysts.

Joe Hayes, senior economist at IHS Markit, said: “The spread of the Omicron variant had a particularly profound impact on the services sector, reflecting renewed hesitancy among customers due to the novel strain of the virus.”

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said: “Services firms highlighted the return of the virus as the main headwind to activity, as the spread of Omicron dented new export orders.”

Despite the pullback in services activity, the industry is still growing, albeit at a slower rate.

The services index dipped to 53.1 from 55.9. A reading above 50 indicates a majority of firms reported growing output.