Amid the ongoing Covid-19 pandemic, euro area private sector activity contracted at an accelerated pace in January as factory output growth weakened to a seven-month low and services output dropped for the fifth straight month, flash survey data from IHS Markit showed on Friday.
The composite output index declined to 47.5 in January from 49.1 in December. The score was seen at 47.6.
The reading signaled the third successive contraction and the steepest deterioration since November. Nonetheless, the economic impact of the second wave of infections has so far been less severe than in the first wave.
“A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter COVID19 restrictions took a further toll on businesses in January,” Chris Williamson, chief business economist at IHS Markit, said.
The survey adds to the view that the eurozone will see a soft start to 2021, but that the economy should pick up momentum again as the vaccine roll out gathers pace, the economist noted.
The rate of factory output growth weakened to the slowest since the recovery began and the service sector saw output fall at the second-fastest rate since May.
At 45.0, the services Purchasing Managers’ Index dropped from 46.4 in December but the reading was above consensus forecast of 44.5.
The factory PMI fell to 54.7 from 55.2 in the previous month. The expected level was 54.5.
Business activity growth in Germany waned to the slowest since the recovery began in July, but the sustained expansion contrasted with output falling at quicker rates in France and the rest of the Eurozone as a whole.
Germany’s flash composite output index fell to 50.8 in January from 52.0 in December. However, the reading was above the economists’ forecast of 50.3.
German services activity dropped for the fourth straight month and manufacturing output remained in growth territory though it dipped to a five-month low.
The services PMI came in at 46.8, down from 47.0 in the prior month. The expected level was 45.3. At the same time, the manufacturing PMI dropped to a 4-month low of 57.0 from 58.3 in December, but was above the forecast of 57.5.
The French private sector logged a faster contraction in January partially driven by the imposition of stricter Covid-19 curfews.
The composite output index slid to 47.0 from 49.5 in the previous month. The expected score was 49.0.
Service providers registered a sharper decline compared to December, while manufacturers reported a fresh downturn following a moderate expansion last month.
The services PMI fell to 46.5 from 49.1 in December, and also below the forecast of 48.5. Meanwhile, the manufacturing PMI rose unexpectedly to 51.5 from 51.1 a month ago. The score was seen easing to 50.5.