LONDON (Reuters) – Euro zone enterprise exercise has contracted sharply this month as renewed restrictions to attempt to quell the unfold of the coronavirus pressured many companies within the bloc’s dominant service business to shut briefly, a survey confirmed on Monday.
The bloc’s financial system is on monitor for its first double-dip recession in practically a decade, a Reuters ballot steered final week, and Monday’s Buying Managers’ Index (PMI) backed up that discovering. [ECILT/EU]
IHS Markit’s flash composite PMI, seen as a very good information to financial well being, fell to 45.1 in November from October’s 50.0 – the precise stage separating progress from contraction. A Reuters ballot had predicted a shallower dip to 46.1.
“The euro zone financial system has plunged again right into a extreme decline in November amid renewed efforts to quash the rising tide of COVID-19 infections,” mentioned Chris Williamson, chief enterprise economist at IHS Markit.
“The information add to the probability that the euro space will see GDP contract once more within the fourth quarter.”
A PMI protecting the service business fell to 41.3 from 46.9, its weakest studying because the peak of the primary wave of the pandemic and properly under the 42.5 predicted in a Reuters ballot.
With demand drying up regardless of worth cuts and backlogs of labor being run down, companies lowered headcount for a ninth month. The companies employment index fell to 48.1 from 48.5.
Nevertheless, manufacturing has fared higher as many factories have remained open and its flash PMI held properly above the breakeven mark at 53.6 in November, albeit under October’s 54.8. The Reuters ballot had predicted 53.1.
An index measuring output, which feeds into the composite PMI, fell to 55.5 from 58.4. Demand additionally eased – the brand new orders index sank to 54.0 from 58.7 – indicating the downward pattern could proceed.
However with hopes for a vaccine and expectations for extra stimulus from the European Central Financial institution subsequent month, optimism concerning the yr forward improved. The composite future output index jumped to 60.1 from 56.5, its highest since February earlier than the pandemic swept throughout Europe.
“Companies throughout each manufacturing and companies have additionally develop into extra optimistic concerning the yr forward, largely reflecting rising hopes that the current encouraging information on vaccines will enable life to return to regular within the new yr,” Williamson mentioned.
Reporting by Jonathan Cable; Modifying by Hugh Lawson