The euro zone on the verge of a return to recession

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THE EURO ZONE ON THE EDGE OF A RETURN IN RECESSION

PARIS (Reuters) – Main provisional results of the Markit surveys of purchasing managers in Europe published on Monday:

* EURO ZONE – THE RETURN IN RECESSION IS APPROACHING

LONDON – Private sector activity in the euro area contracted sharply in November, as new restrictive measures taken to stem the second wave of coronavirus forced many companies in the service sector to temporarily close their doors.

The preliminary results of the IHS Markit Purchasing Managers’ (PMI) surveys for the current month reinforce the scenario of the monetary union economy returning to recession.

The composite index, which combines manufacturing and services activity, fell to 45.1 in November, tipping into contraction territory after activity stagnated last month, illustrated by an index at 50.0.

Economists polled by Reuters had expected a somewhat smaller decline, to 46.1.

Services suffered particularly in November with an index at 41.3 against 46.9 the previous month.

Manufacturing activity held up better and remained in growth territory (53.6 against 54.8).

“The euro area economy suffered another severe setback in November due to renewed efforts to counter the surge in COVID-19 contamination,” said Chris Williamson, economist at IHS Markit.

“The numbers increase the likelihood that domestic product will experience a further contraction in the fourth quarter,” he adds.

* GERMANY – CONTAINMENT HITS THE SERVICE SECTOR

BERLIN – The contraction of the German services sector intensified in November as a result of new restrictive measures implemented in an attempt to stem the spread of COVID-19, show preliminary results of IHS Markit’s surveys purchasing managers (PMI).

The service index fell to 46.2 against 49.5 the previous month, sinking below the threshold of 50, ie in contractionary territory. It is very close to the forecasts of economists polled by Reuters, who expected an index at 46.3.

Manufacturing activity slowed a bit but remained strong, at 57.9 from 58.2 in October and a consensus of 56.5.

The composite index, which combines services and the manufacturing sector, remains in growth territory, at 52.0 against 55.0 the previous month and a consensus of 50.4.

“The resilience of the manufacturing sector, which the survey shows is benefiting from a recovery in sales, particularly in Asia, supports our scenario according to which a possible decline in the last quarter would be much less marked than those observed in the first half”, comments Phil Smith, IHS Markit economist.

“The good news regarding the development of vaccines against COVID-19 has helped to boost the morale of German entrepreneurs, many of whom are now hoping for a return to normal activity over the next 12 months,” added- he does.

* FRANCE – PRIVATE SECTOR ACTIVITY HAS SIX MONTHS TROUGH

PARIS – Private sector activity in France experienced its sharpest contraction in six months in November, the measures taken to counter the second wave of coronavirus penalizing the service sector in particular.

The composite index, which combines manufacturing and services activity, fell to 39.9, its lowest since May, from 47.5 in October, sinking further below the 50 threshold between contraction in growth, show preliminary results from IHS Markit’s Purchasing Managers (PMI) surveys.

This index is, however, higher than forecasts of economists polled by Reuters, who expected it at 34.0.

“These results suggest that some French companies are managing to adapt to the new conditions and are therefore less likely to experience a marked decline in activity if restrictive measures are tightened,” comments Eliot Kerr, IHS Markit economist .

The services index fell to 38.0 against 46.5 the previous month, in line with expectations, that of manufacturing activity fell to 49.1 against 51.3 in October and a consensus of 50.1 .

(Reuters European Offices, French version Patrick Vignal, edited by Blandine Hénault)

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