Euro Zone Business Activity Shrank in January

Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the blocs dominant service industry hard, a survey showed.

With hospitality and entertainment venues forced to remain closed across much of the continent the survey highlighted a sharp contraction in the services industry but also showed manufacturing remained strong as factories largely remained open.

IHS Markits flash composite PMI, seen as a good guide to economic health, fell further below the 50 mark separating growth from contraction to 47.5 in January from Decembers 49.1. A Reuters poll had predicted a fall to 47.6.

A doubledip recession for the euro zone economy is looking increasingly inevitable as tighter COVID19 restrictions took a further toll on businesses in January, said Chris Williamson, chief business economist at IHS Markit.

Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year.

The blocs economy was expected to grow 0.6 this quarter, a Reuters poll showed earlier this week, and will return to its preCOVID19 level within two years on hopes the rollout of vaccines will allow a return to some form of normality. ECILTEU

A PMI covering the blocs dominant service industry dropped to 45.0 from 46.4, exceeding…

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