Eurozone Economy Plunges Into Further Decline Amid New Coronavirus Lockdowns

It appears that the eurozone is headed for yet another economic contraction amid soaring coronavirus infections and renewed lockdowns to curb the spread of the deadly virus.

According to the latest IHS Markit survey, the flash eurozone PMI composite output index dropped from 50.0 in October to 45.1 in November, while the flash eurozone services PMI activity index fell from 46.9 to 41.3 in the same period. A reading below 50 suggests that an economic contraction is underway, while a reading above 50 indicates economic growth.

Apart from the drastic decline in business activity during the first two quarters of the year amid pandemic lockdowns, the average PMI reading of 47.6 witnessed in the fourth quarter has thus far been the lowest since the 2012 debt crisis. IHS Markit noted that the decline in economic performance has been broad-based across all sectors, especially in the hospitality, travel and consumer-facing category. Companies focused in this category have suffered an unprecedented and continued drop in demand due to additional virus containment measures recently reimposed by multiple European governments.

Germany, which accounts for Europe’s largest and most productive economy, has thus far been able to withstand what would have been an even steeper economic plunge for the region. Although the flash composite PMI for Germany did not enter negative territory, it did fall from 55.0 in October to 52.0 in November. Nonetheless, IHS Markit predicts that further economic declines are on the horizon, which will likely stall Europe’s recovery even more. The research firm anticipates that the eurozone economy will contract by 7.4% in 2020, and grow by a mere 3.7% in 2021.

Information for this briefing was found via the IHS Markit. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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