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Eurozone PMI Flash January 2020: Business activity shrinks again

A man over 75 receives a vaccine against coronavirus (Covid-19), shot in Strasbourg, France.

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LONDON – Business activity in the eurozone fell to a two-month low in January, according to preliminary data on Friday, amid tighter blockades related to the coronavirus.

The region is struggling with rising levels of Covid-1

9 infection and stricter restrictions as new strains of the virus spread, causing further economic pain.

Markit’s flash composite PMI for the eurozone, which looks at activity in both manufacturing and services, fell to 47.5 from January to 49.1 in December. The reading below 50 represents a contraction of activity.

Chris Williamson, chief business economist at IHS Markit, said the double recession for the eurozone seemed “increasingly inevitable”.

“The stricter restrictions on COVID19 dealt an additional blow to businesses in January,” he said in a statement.

“Production declined at an accelerated pace, driven by deteriorating conditions in the services sector and a weakening of output growth to the lowest ever seen in the sector’s seven-month recovery.”

European Central Bank President Christine Lagarde acknowledged on Thursday that the pandemic still poses “serious risks” to the eurozone economy.

In addition to the new Covid variants, there are concerns about the slow introduction of vaccinations across the European Union.

“In this environment, the abundance of monetary incentives remains essential,” Lagarde said. At a meeting on Thursday, the ECB decided to keep interest rates and broader stimulus programs unchanged for the time being, strengthening its support in December.

The ECB expects euro area GDP (gross domestic product) to increase by 3.9% in 2021 and 2.1% in 2022. This is after a contraction of 7.3% last year. However, these forecasts depend on the development of the pandemic.

France rents more

Earlier, data on business activity in France also reached the lowest level of two months, which reflects the imposition of tighter evening hours in the country. The country’s combined PMI for January was 47, which shrank.

However, the French business hired more employees in January – the first increase in employment figures in nearly a year.

“The fact that companies have returned to recruitment shows some confidence in the economic recovery in the second half of this year,” said Elliott Kerr, an economist at IHS Markit, in a statement.

In Germany, business activity managed to grow slightly in January, with the index of lightning composite production reaching 50.8. However, the reading represents a seven-month low for the European economic engine.

Phil Smith, associate director at IHS Markit, highlighted the slower pace of production in the country and the continuing blow to the services sector in January.

“Overall, the German economy is slowly starting the year, and extending the current restraint measures until at least mid-February means that this looks like the picture for the next few weeks,” he said.

The German government decided a few days ago to extend the national lock until February 14.

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