Euro Area: Covid-19 restrictions prompt steep downturn in November
The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, slumped to 45.1 in November from 50.0 in October, marking the worst reading in six months. Therefore, the PMI moved below the 50-threshold that distinguishes contracting from expanding activity in the private sector.
Although both the manufacturing and the services sector weakened in the month, the latter was the hardest hit from renewed lockdowns. Output in the manufacturing sector continued to expand, albeit at a softer pace than in October, while production in the services sector shrank at the sharpest pace since May. Similarly, new orders grew less robustly in the manufacturing sector, while they fell steeply in the services sector. Meanwhile, firms cut jobs for the ninth consecutive month. On the price front, input cost inflation softened, translating into the ninth consecutive month of decrease in selling prices.
Assessing the Eurozone’s two largest economies, Germany continued to expand in November, albeit at a slower pace, supported by a robust increase in manufacturing output, while France saw business activity deteriorate at a steeper pace.
Commenting on the release, Chris Williamson, chief business economist at IHS Markit, said:
“The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections. The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter.”
Meanwhile, Bert Colijn, Eurozone senior economist at ING, stated:
“Falling Eurozone PMIs confirm the second downturn for the eurozone economy. However, the silver lining is that business confidence is improving on vaccine developments which should bode well for 2021 recovery.”