The Recovery Of The Eurozone Economy Came To A Halt In October

The Recovery Of The Eurozone Economy Came To A Halt In October

The recovery of the eurozone economy came to a halt in October as the second wave of the new coronavirus pandemic forced governments in the region to resume blockades. This has hit the dominant services sector particularly hard. This follows from updated data from IHS Markit.

The Euroregion is heading for a second recession

According to the latest results, the combined Purchasing Managers Index (PMI) for the service and manufacturing sectors in the euro area, which is a key indicator of the future activity of companies, after seasonal adjustment in October, it reduced to a break-even point of 50 points from 50.4 points in September. The updated result is better than the quick estimate, which signaled that the October index would fall to 49.4 points, ie below the limit of 50 points, which separates the growth of activity in the sector from its decline. Nevertheless, this means that the growth of the euro area private sector has stopped after three months and the Euroregion is heading for a second recession. The better result of the PMI was mainly due to the manufacturing sector, which in October achieved the highest growth rate in 2.5 years. In sharp contrast, the decline in activity in the services sector was at its lowest level since May. Specifically, the PMI of the services sector fell to 46.9 points in October from 48 points in the previous month. And although the refined PMI was more than 46.2 points in a quick estimate, it is also the lowest since May and has remained below 50 points for the second month in a row.

Germany was the only one to show growth

On Monday, Markit released data from the eurozone manufacturing sector, whose PMI rose to 54.8 points in October from 53.7 points in September. Markit also pointed to significant differences in the performance of individual euro area countries, with Germany, the bloc's largest economy, being the only one to show growth in the combined PMI. In the other monitored countries, its value fell below 50 points. More precisely, the combined PMI of Germany reached 55 points in October, which was its three-month high. It is followed by Italy with a PMI of 49.2 points (four-month low), Ireland with a PMI of 49 points (two-month high), France with 47.5 points (five-month low) and Spain with 44.1 points (five-month low). Chief Economist Markit Chris Williamson pointed out that after tightening measures and introducing so-called lockdowns (restrictions on movement) in many eurozone countries, it will be difficult to prevent the region's economy from declining again. He added that the prospects of all bloc states are deteriorating. The performance of the euro area economy declined by 11.8 percent in the second quarter, but rose again by 12.7 percent in the third quarter, after easing many restrictions. However, the second wave of the pandemic threatens its recovery and experts predict a second recession for the Euroregion.