Eurozone trade activity shrinks to six-month low after new coronavirus lockdowns – NBC 5 Dallas-Fort Worth

• The economic shock was again felt mainly in the service sector with the closure of non-essential stores, curfews and traffic restrictions.
• EU leaders plan to lift some of the restrictions in the coming weeks, albeit in a very gradual fashion.
• Economic activity in France fell to a six-month low in November, while the German economy once again showed stronger signs of resilience vis-à-vis its European counterparts.

LONDON Economic activity in the euro area sank again in November after governments introduced new lockdowns and social restrictions to contain the spread of the coronavirus.

However, news that a Covid-19 vaccine may soon be ready for distribution has made companies more confident that they will return to their normal activity levels over the next 12 months.

The flash eurozone composite production PMI, which examines activity in both manufacturing and services sectors, stood at 45.1 in November, the lowest level in six months, and in down from 50 in October.

A reading below 50 represents a contraction in business activity.

“The euro area economy plunged back into a severe decline in November amid renewed efforts to stem the rising tide of COVID-19 infections,” Chris Williamson, chief economist at IHS Markit said in a statement.

Amid a second wave of coronavirus cases in the fall, many European countries tightened social restrictions in October, which again took a toll on their economies. The economic shock was again felt mainly in the service sector with the closure of non-essential stores, traffic restrictions and curfews.

Speaking to CNBC’s “Street Signs Europe” on Monday, Williamson explained that the nature of the latest lockdowns is different from those introduced earlier this year and that means the economic shock has been somewhat weaker.

“There’s a bigger picture here, which is the overall nature of the spring lockdown. So what we got was a synchronized lockdown and that meant there was literally no demand anywhere, but now you have pockets of really strong rebound. demand, ”he said.

However, decisions to introduce new lockdowns have contributed to a new cases also peak.

As a result, EU leaders plan to lift some of the restrictions in the coming weeks, albeit in a very gradual fashion.

This is because some countries are still struggling with a high number of daily infections and leaders want to avoid a third wave new cases in a few weeks.

“The further economic slowdown reported for the fourth quarter represents a major setback for the health of the region and prolongs the period of recovery,” said Williamson, adding that IHS Markit was forecasting a 7.4% contraction in GDP. (gross domestic product) in 2020. and only an expansion of 3.7% in 2021.

France: companies are adapting

In France, where President Emmanuel Macron is due to speak on Tuesday, non-essential stores are expected to reopen in early December, but movement limits will remain in place for some time.

Economic activity in France fell to its lowest level for six months in November thanks to the reimposition of a nationwide lockout. However, the economic shock was less severe than that caused by the first shutdown in the spring.

The French PMI flash production composite index stood at 39.9 in November, with activity in the service sector declining more than in industry.

“These results suggest that some French companies have been able to adapt their operations to the new conditions and are subsequently less likely to experience sharp declines in activity when tighter restrictions are imposed,” said Eliot Kerr, economist at IHS Markit in a statement.

Germany: Manufacturing resilience

At the same time, the German economy has once again shown signs of stronger resilience vis-à-vis its European counterparts.

The German composite flash production PMI stood at 52 in November, the lowest in five months, but still positive.

Manufacturing activity recorded “strong growth” while the service sector remained marginally in negative territory.

“The resilience of the manufacturing sector, which the survey shows is benefiting sales growth in Asia in particular, confirms our view that any slowdown in the last quarter should be much less severe than those seen in the first half of the year.”, Phil Smith, associate director of IHS Markit, said Monday.

He added that the last vaccine news boosted the morale of German businesses, which now expect a return to normal within the next 12 months.

“This appears to have been a supporting factor in the latest employment figures, which show that the number of factory jobs is approaching stabilization and that the service wage bill is increasing slightly,” he said. declared.