A 75-year-old man receives a coronavirus vaccine (Covid-19) shot in Strasbourg, France.
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LONDON – Trade activity in the eurozone fell to a two-month low in January, preliminary data showed on Friday, behind tighter coronavirus blockages.
The region is facing rising rates of Covid-19 infection and stricter restrictions as new strains of the virus spread, further causing economic pain.
Markit’s flash composite PMI for the euro area, which looks at both production and services, fell to 47.5 in January from 49.1 in December. A reading below 50 is a contraction of activity.
Chris Williamson, chief business economist at IHS Markit, said a double-dip recession for the eurozone seemed “increasingly inevitable”.
“The stricter restrictions on COVID19 continued to affect businesses in January,” he said in a statement.
“Production fell at an increased rate, driven by worsening conditions in the services sector and a weakening of production growth to the lowest recorded so far in the seven-month recovery in the sector.”
European Central Bank President Christine Lagarde acknowledged on Thursday that the pandemic still poses “serious risks” to the eurozone economy.
In addition to the new Covid variants, there are concerns about the slow launch of vaccination in the European Union.
“In this environment, broad monetary stimulus remains essential,” Lagarde said. The ECB decided at a meeting on Thursday to keep interest rates and broader stimulus programs unchanged for the time being, after increasing support in December.
The ECB expects euro area GDP (gross domestic product) to grow by 3.9% in 2021 and 2.1% in 2022. This follows a contraction of 7.3% last year. However, these forecasts are dependent on the evolution of the pandemic.
France hires more
Previously, France’s trade activity data also reached a minimum of two months, reflecting the imposition of strict restrictions throughout the country. The country’s composite PMI for January was 47, making a contraction.
However, French companies hired more employees in January – the first increase in jobs in almost a year.
“The fact that firms have returned to recruitment indicates some confidence in an economic recovery in the second half of this year,” Eliot Kerr, an economist at IHS Markit, said in a statement.
In Germany, commercial activity managed to increase slightly in January, with the composite production index rapidly reaching 50.8. However, the reading was a minimum of seven months for Europe’s economic engine.
Phil Smith, associate director at IHS Markit, showed a slower momentum in production in the country and continued success for the service sector in January.
“All in all, the German economy has started a slow year, and extending the current containment measures until at least mid-February means that this seems to be the picture for the next few weeks,” he said.
The German government decided a few days ago to extend the national blockade until February 14.