COVID-19 : Business activity in the euro zone adds 4 months to the decline dragged by the third wave of covid

The third wave of the coronavirus continues to show its impact on the business sector. Private activity in the euro zone deteriorated again in February, adding up to four consecutive months of contraction, as revealed by the composite index of purchasing managers (PMI), prepared by the consulting firm IHS Markit.

The February result is explained by the impact of the containment measures in the services sector, while manufacturing increased its activity and cushioned the economic impact of the outbreaks. Specifically, the February advance data for the composite PMI of the euro zone stood at 48.1 points, compared to 47.8 in January, fulfilling its fourth consecutive month below the threshold of 50 integers, which separates the contraction from the expansion, after the service sector worsened its activity levels, with a reading of 44.7 points, compared to 45.4 for January, and manufacturing accelerated its growth to 57.7 integers from 54.8 the previous month.

The deterioration in activity and the fall in pending orders It caused a further reduction in employment levels in the euro area, which have been declining for twelve consecutive months, given that the workforce cuts in the services sector offset a modest increase in hiring in the manufacturing sector, whose workforce grew for the first time since April 2019.

The deterioration in activity and the fall in pending orders caused a further reduction in employment levels in the euro area

However, despite accumulating four months down, the survey authors note that activity levels have remained much higher than during spring 2020, suggesting that the economic impact of the second wave of infections of the virus so far has been much less acute than that seen during the first wave.

In its preliminary analysis, IHS Markit highlights that the activity data in Germany it accelerated in February, to 51.3 points, from 50.8 in January, while in France, the composite PMI reading worsened to 45.2 points from 47.7 the previous month.

IHS Markit Chief Economist Chris Williamson noted that vaccine developments have helped revive the business confidence and companies in the euro zone they show increasing optimism about the prospects for recovery.

“If vaccination campaigns can bolster growth in the service sector while the manufacturing sector remains robust, the second half of the year will see a robust recovery,” said Williamson.

However, the expert warned that “a worrying factor is the new intensification of the supply shortage, which has increased
commodity prices ‘, leading to the highest producer-borne cost inflation in nearly a decade, although weak consumer demand for the time being limits overall price pressures, although’ it seems likely that inflation accelerates in the coming months ».