Eurozone economy in ‘steep downturn’, says key survey

BRUSSELS – Eurozone economic activity plunged in November, a key survey showed on Monday, due to a resurgence of lockdowns across Europe as the second wave of the coronavirus tightened its grip.

“The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of Covid-19 infections,” said Chris Williamson, chief economist at IHS Markit.

The firm’s closely watched PMI index plummeted to 45.1 points from 50.0 points in October, well below the key 50-point level which indicates growth.

IHS Markit said this offered a clear indication that the economy in the 19-member single currency area would stumble back into recession in the fourth quarter, erasing any gains seen over the middle of the year.

Importantly, “the further downturn of the economy... represents a major set-back to the region’s health and extends the recovery period,” Williamson said.

All was not bleak, with survey results demonstrating emerging optimism for a better recovery next year on the back of signs effective vaccines were close at hand.

Still, IHS Markit said it forecast the eurozone economy would contract by a historic 7.4 percent in 2020 and expected a recovery of just 3.7 percent in 2021.

IHS Markit said the downturn in November was broad but would hit the service sectors the hardest, especially those most constrained by the partial lockdowns.

France, the bloc’s second-biggest economy, was particularly hard-hit with a result of just 39.9 points on the PMI, indicating a very deep downturn.

The eurozone’s number one economy, Germany, managed to show expansion in the period, probably buoyed by factory exports to Asia and a relatively lower rate of coronavirus infections.