Business activity in the euro area declines again

Business activity in the euro area declines again

According to preliminary data released on Friday, economic activity in the eurozone decreased in October due to the return of restrictions to contain the spread of coronavirus.

The composite index of manufacturing activity PMI for the euro zone, which reflects activity in both the manufacturing sector and the service sector, fell to a four-month low in October to 49.4 points from 50.4 in September. A reading below 50 points means a decrease in activity.

The latest data showed that manufacturing has remained relatively stable over the past month, but activity in the services sector has fallen to a five-month low..

Business activity in the euro area declines again

«Eurozone at increased risk of double downturn as second wave of viral infections led to renewed downtrend in October», – said in a statement Chris Williamson, Chief Business Economist at IHS Markit.

He added that the data «reveals the story of two economies with the fastest growing manufacturers since the beginning of 2018 … but tightening restrictions due to Covid-19 are taking their toll on the service sector».

The latest figures coincide with a period of new restrictions in the eurozone as it grapples with a second wave of coronavirus infections.

France reimposed the curfew last week and extended it to multiple regions on Thursday, which means restaurants and bars in cities such as Paris, Marseille and Lyon must close at 21:00 local time. On Thursday, French authorities reported a record number of new infections.

The composite index of French production in October was 47.3 points, which is a five-month low, compared to 48.5 points in September..

The Netherlands returned to partial isolation last week as the number of infections rose sharply in the country. The new restrictions include the following measures: no more than three visitors per day per accommodation; restaurants and bars should be closed, but they can still be traded for takeaway. Ireland, meanwhile, has announced a four-week ban on household visits and Germany advises people not to go to ski resorts..

Germany’s composite output reached 54.5 points in October, given the importance of manufacturing to the economy as a whole.

«The differences across countries are even more significant. While Germany is supported by its manufacturing sector … the rest of the region is experiencing a deepening recession», – said Williamson.

Business activity in the euro area declines again

The problems facing the eurozone in the wake of the pandemic are putting additional pressure on the European Central Bank. Economists believe further monetary stimulus is expected by the end of the year.

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