A double-dip recession in the euro zone is “increasingly inevitable” due to Covid-19, with France among the hardest hit countries, experts have warned.
The slowdown in business activity in the euro zone intensified in January as the pandemic continued to weigh on the economy, a key poll revealed on Friday.
The closely watched PMI index compiled by IHS Markit is believed to be the earliest indicator of economic health, and the latest reading confirmed fears that the year-long virus crisis remains strong.
France was among the hardest hit countries in the euro area, according to the PMI index compiled by IHS Markit, amid concerns about the country’s introduction of vaccination. In the picture: metal barriers block access to the pyramids of the closed Louvre in Paris
France was one of the worst hit countries in the euro zone. The news came amid concerns about the slower adoption of vaccines in the country than others.
Much hope has been put into distributing the vaccinations to reopen the economy, but the campaign in the EU is slower than hoped.
In the UK, which left the EU on January 1, the relapse into a third national lockdown sparked the sharpest decline in business since May, with service companies hit hardest, according to the survey.
The series of malicious bans is largely due to the spread of a more contagious virus strain.
A preliminary “flash” UK Composite Purchasing Managers’ Index (PMI) fell to 40.6 in January from 50.4 in December in the poll announced on Friday.
However, the UK vaccination program was rolled out much faster than countries on the continent, in part due to the ability to avoid European bureaucracy since Brexit that is holding others back.
In the UK, 8.01 doses of vaccine were given per 100 people as of January 22nd. In France, however, it was only 1.26, in Germany 1.67 and in Spain 2.36.
Pictured: Bournemouth International Center in the UK. The UK vaccination program was implemented much faster than the countries of the continent, thanks in part to its ability to avoid the European bureaucracy holding others back
Pictured: A graph showing the cumulative Covid-19 vaccination doses given in 100 countries per 100 people on January 22nd
“A double-dip recession for the eurozone economy seems increasingly inevitable as tighter Covid-19 restrictions continued to weigh on businesses in January,” said Chris Williamson, chief economist at IHS Markit.
This meant that the economies of the 19 countries using the single currency dominated by Germany and France would slide back into recession after only a very brief recovery in the European summer.
The company’s closely watched PMI index fell from 49.1 points in December to 47.5 points this month, further from the 50-point level that indicates growth.
However, Williamson noted that the bad start to 2021 would be less damaging than the economic collapse seen in the first wave of the pandemic last year.
This was due to “the continuing relative resilience of the manufacturing sector, increasing demand for exported goods and, on average, less stringent lockdown measures than last year,” he said.
The difference between France and Germany was remarkable.
The almost empty Pariser Platz in front of the Berlin landmark Brandenburg Gate (Brandenburger Tor) was reflected in a shop window on January 22, 2021. Europe’s top economy Germany extended its partial lockdown this week until February 14, 2021. A preliminary “lightning bolt” The UK Composite Purchasing Managers’ Index (PMI) fell from 50.4 to 40.6 in January
German exports were only just able to keep the country on a growth path, while French business activity fell.
The situation was even worse for the rest of the eurozone, which made up just over half of the bloc’s economy.
Worryingly, employment across the euro zone fell for the eleventh consecutive year, albeit with slight gains in France and Germany, said IHS Markit.
The gloomy picture was confirmed by a warning from the head of the European Central Bank, Christine Lagarde, who saw that “serious risks” still loom in the eurozone economy.
The introduction of vaccines had created “a high level of confidence” but “the recent surge in virus case numbers has led to some decline in optimism,” Williamson said.
The UK economy is falling again, according to a PMI poll
The UK’s relapse into a third national COVID-19 lockdown has sparked the sharpest decline in business since May, with service companies hardest hit, a poll on Friday found.
A preliminary ‘Flash’ index for composite purchasing managers (PMI) from IHS Markit / CIPS UK fell from 50.4 in December to 40.6 in January.
The decline below the growth threshold of 50 was greater than any forecast by an economist in a Reuters poll that pointed to a value of 45.5.
In addition to the recent lockdown, data firm IHS Markit said the UK’s post-Brexit relocation to a more bureaucratic trade deal with the European Union contributed to the decline.
“Services were again particularly hard hit, but growth in manufacturing has almost stalled. This is due to a cocktail of COVID-19 and Brexit, which has led to ever greater delivery delays, rising costs and falling exports,” said Chris Williamson, chief executive economist at IHS Markit, said.
The pace of job loss accelerated after subsiding in December.
England is currently in its third lockdown due to Covid 19. Restrictions mean that people cannot leave their homes for work, exercise and shopping for pubs with essential items.
Economists polled by Reuters last week predicted a 1.4% decline in production for the first quarter.
The official death toll from COVID-19 in the UK stands at nearly 100,000 and is currently the highest in Europe and the fifth worst in the world after the US, Brazil, India and Mexico.
The UK is introducing vaccines faster than many of its peers, which should point to a rapid economic recovery later this year.
Thursday’s poll found that companies were optimistic about their business outlook for the coming year, with optimism hitting a 6-1 / 2-year high.
The PMI for the services industry, which makes up most of the UK private sector, fell from 49.4 in December to 38.8 in January, its lowest level since May, marking a third month of contraction.
The factories fared much better despite slowing production growth and another decline in order books. The purchasing managers index for manufacturing fell from 57.5 in December to 52.9 in January and stayed above the dividing line of 50 for growth.