Economic activity in the eurozone has plummeted in January as lockdown measures hit the bloc’s dominant service industry, a survey showed today.
IHS Markit’s guide to economic health fell further below the 50 mark to 47.5 in January, a further dip from December’s 49.1.
Chris Williamson, chief business economist at IHS Markit, believes a double-dip recession is increasingly inevitable for the eurozone economy as tight coronavirus restrictions take their toll on businesses.
He did, however, hint at some optimism for the future.
Williamson said: “Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year.”
The bloc’s economy was expected to grow 0.6 per cent during the start of 2021, with the aim of returning to its pre-Covid level within two years based on successful vaccine rollouts.
The forced closure of hospitality and entertainment venues across much of Europe led to a sharp shrinkage in the services industry but manufacturing prevailed as factories largely remained open.
Despite factory activity holding the manufacturing PMP well above breakeven at 54.7, employment index fell by 0.6 per cent to 48.9 as jobs were cut.
As immunisation programmes are ramped up, cautious optimism is increasing across Europe about the year ahead.
For now, it is a case of weathering the storm.
Williamson added: “The roll out of vaccines has helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism.”