Eurozone rebound stalls as Covid cases hit services sector
The Eurozone’s economic recovery stalled in September as rising coronavirus cases knocked the massive services sector backwards, according to preliminary survey data.
The IHS Markit composite purchasing managers’ index (PMI) – a gauge of the health of the private sector – fell to 50.1 in September from 51.9 in August.
That was the lowest figure since June. And it was well below the consensus prediction by economists of a slight fall to 51.7.
In the PMI system, a score above 50 indicates growth. Today’s survey therefore suggested that Eurozone companies only just expanded in September.
Worryingly for the Eurozone, the services sector contracted in September. It makes up more than 70 per cent of the economy.
The sector “has sunk back into decline as face-to-face consumer businesses in particular have been hit by intensifying virus concerns,” said Chris Williamson, chief business economist at data firm IHS Markit.
Some Eurozone countries have seen cases rise sharply in recent weeks. Greece and Spain are among the states that have imposed new restrictions.
Today’s survey showed the unevenness of the Eurozone’s economic recovery, however. IHS Markit said Germany “continued to lead the recovery”. Yet even here the services sector slipped into decline.
There was also a sharp difference across sectors. Manufacturing output grew at the fastest level since February 2018, with firms reporting higher demand from export markets.
Both sectors saw job losses as firms adapted to life during the coronavirus pandemic. However, cuts were much sharper in the services sector.
Jessica Hinds, European economist at consultancy Capital Economics, said the September PMI “adds to the evidence that the initial rebound in activity has already run out of steam”.
She added: “With no sign that the resurgence in virus cases has been stamped out, there is a clear and growing risk that it goes into reverse.”