Left Menu
Development News Edition

Euro zone economic recovery in danger as services slide

Reuters | Berlin | Updated: 23-09-2020 15:51 IST | Created: 23-09-2020 15:49 IST
Euro zone economic recovery in danger as services slide
Representative Image Image Credit: Pixabay

Euro zone business growth ground to a halt this month, throwing the economic recovery into question, as fresh restrictions to quell a resurgence in coronavirus infections slammed the services industry into reverse, a survey showed on Wednesday. The renewed downturn in the dominant services sector, which is likely to be hit harder by new constraints on activity imposed across the 19-country euro zone, more than offset the strongest manufacturing growth in two years.

"Alarm bells should be going off about the pace of the recovery at the moment as the number of new COVID-19 cases has been flaring up," said Bert Colijn at ING. "For governments and the European Central Bank, this will be a wake-up call, if they needed one."

IHS Markit's flash Purchasing Managers' Index sank to 50.1 in September from August's 51.9, only just above the 50 mark separating growth from contraction and well below the median forecast in a Reuters poll for a modest dip to 51.7. Tough lockdown measures to halt the spread of the virus brought economic activity to a virtual standstill at the height of the pandemic's first wave in the spring.

Most measures were relaxed as infection rates fell sharply and recent data have suggested the continent weathered the COVID-induced recession better than many feared. But Wednesday's gloomy survey of private sector businesses suggested "the recovery is grinding to a halt, at least outside the German manufacturing sector", said Jessica Hinds at Capital Economics.

"And with no sign the resurgence in virus cases has been stamped out, there is a clear and growing risk it goes into reverse, at least in the countries worst affected by the virus." SLOW RETURN

The flash PMI for the euro zone service industry plummeted to 47.6 from 50.5, significantly below the breakeven mark and falling short of even the most pessimistic forecast in a Reuters poll that had predicted a reading of 50.5. Manufacturers fared much better, with the factory PMI climbing to a just over two-year high of 53.7 from 51.7 and a median forecast of 51.9. While services came in below all expectations, manufacturing was above all of them.

The European Central Bank has already planned 1.35 trillion euros of pandemic-related asset purchases to support the economy and there is an historic 750 billion euro recovery fund from the European Union due to kick in next year. But a return to where the economy was before the outbreak is not expected until at least end-2022 and the new rise in coronavirus cases is the biggest threat to the recovering economy, according to a Reuters poll of economists.

Separate flash PMIs showed Germany's private sector continued to recover this month but more slowly than expected. In France, the euro zone's second biggest economy, activity slowed to a four-month low with services weaker than expected as the country struggled to contain a surge in new COVID-19 cases. In Britain, outside the currency union, the recovery from the lockdown lost some momentum as consumer-facing sectors suffered from the end of a government subsidy to support restaurants and more general COVID-related worries.



Uganda COVID-19 response: Was off to a good start but reopening dwindled prospects

Uganda has shown success in using health information to enhance efficiency of disease surveillance, reporting and monitoring. The success, however, has critical challenges confronting it as the country resumes normal activities....

New farm bills in India: Focusing on farms or farmers?

... ...

Kenya’s COVID-19 response: Chaos amid lack of information

Confusing numbers and scanty information on how effective curfews and lockdowns have been in breaking transmission have amplified coordination and planning challenges in Kenyas response to COVID-19. Without accurate data, it is impossible t...

Farkhad Akhmedov: Calculating the price of impunity from the law

In insistences such as the battle over the Luna, Akhmedov has resorted to extreme legal machinations to subvert the High Courts decision and keep his assets from being seized. ...


Latest News

Amazon India Launches Delivering Smiles Program to Support the Education of Students From Marginalized Communities

Bengaluru, Karnataka, India Business Wire India Amazon India today announced a Delivering Smiles program to address the urgent need among students from low-income and under-served communities for smart devices for online education in the...

FOREX-Euro dips on French lockdown fears, U.S. vote drives volatility gauges up

The dollar rose against the euro on prospects of a national coronavirus lockdown in France, with implied volatility gauges in the common currency and the yen hitting multi-month highs as traders positioned for next weeks U.S. election. The ...

Israel extend science accords into West Bank settlements

The United States and Israel amended a series of scientific cooperation agreements on Wednesday to include Israeli institutions in the West Bank, a step that further blurs the status of settlements widely considered illegal under internatio...

Mastercard profit falls as pandemic hits spending volumes

Mastercard Inc reported a 28 slump in quarterly profit on Wednesday as fewer people used its cards to shop, travel and pay bills during the COVID-19 pandemic.Net income fell to 1.5 billion, or 1.51 per share, in the third quarter ended Sept...

Give Feedback