Poll: Euro zone business activity shrank sharply last month

EURO zone business activity contracted sharply last month as governments across the bloc reimposed strict lockdown measures to try to quell a second wave of coronavirus infections, a survey showed last week.

The bloc’s economy will shrink again this quarter, according to a Reuters poll, but with hopes for a coronavirus vaccine and additional support from the European Central Bank, quarterly growth forecasts for next year were upgraded.

IHS Markit’s composite PMI, seen as a good guide to economic health, sank to 45.3 in November from October’s 50.0 – the exact level separating growth from contraction. That was however above an earlier flash reading of 45.1.

“The euro zone economy slipped back into a downturn in November as governments stepped up the fight against COVID-19, with business activity hit once again by new restrictions to fight off second waves of virus infections,” said Chris Williamson, chief business economist at IHS Markit.

A PMI covering the bloc’s dominant services industry sank to 41.7 from October’s 46.9, marking its third month below the breakeven mark. That was its lowest reading since May, when the first wave of the virus was sweeping across Europe.

With hospitality venues forced to close, shops to shut and citizens encouraged to stay at home, demand slumped. The services new business index fell to 40.6 from 45.7.

But overall optimism about the coming year improved and the composite future output index jumped to 60.4 from 56.5.

“Encouragingly, growth expectations have lifted higher, as vaccine developments fuel optimism that life can start to return to normal in 2021,” Williamson said. – Dec 3, 2020.

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