The eurozone’s economic recovery from its deepest decline on record has stumbled this month, particularly in services, as rising demand disappeared last month due to lowering coronavirus lockdowns, a survey showed on Friday .
To contain the spread of the virus, which has infected more than 22.5 million people worldwide, governments have imposed strict lockdowns – forcing businesses to close and citizens to stay home, bringing economic activity close.
After many of those restrictions were relaxed, eurozone activity expanded at the fastest pace since mid-2018 last month. But as infection rates have risen again in parts of the region, some previous sidewalks have been reset.
So likely from concerns for policymakers and diminished hopes for a V-shaped recovery, IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good measure of economic health, dropped to 51.6 from last July’s reading of 54.9 .
While it was still above the 50 mark that separated growth from contraction, it was among all forecasts in a Reuters interview that had no change since July.
“The rebound of the eurozone lost momentum in August, highlighting the inherent demand weakness caused by the COVID-19 pandemic,” said Andrew Harker, economic director at IHS Markit.
“The recovery was underpinned by signs of emerging virus cases in various parts of the eurozone.”
A new business index fell to 51.4 from 52.7 and again some of the August activity was downgraded by companies completing backlogs.
Meanwhile, growth in the block’s dominant service sector remained stagnant – its PMI fell to 50.1 from 54.7, below all forecasts in the Reuters poll which predicted a small dip to 54.5.
With demand declining, services companies are cutting some for a sixth month and sharper than in July. The employment index fell to 47.7 from 47.9.
However, factory activity – which has not been as sharply declining as the pandemic’s service industry – expanded for a second month. The manufacturing allowance dropped to 51.7 from 51.8, revising the Reuters poll forecast to rise to 52.9.
An index measuring output, which enters the composite PMI, went to 55.7 out of 55.3.
Assuming that manufacturers do not expect purchasing managers from a large catch in activity, they buy less raw materials. The index for quantity of purchases rose only to 49.6 from 48.3.
A full bounceback of the deepest eurozone recession on record will take two years or more, according to a Reuters poll of economists published on Thursday.
“The eurozone is at a crossroads, with growth set to pick up or fight in the coming months after the first rebound after the lockdown,” Harker said.
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