Following the comment Thursday of European Central Bank (ECB) President Christine that Covid continues to pose “serious risks” to the euro zone economy, preliminary data released today indicates business activity has fallen to a two-month low.
IHS Markit’s flash composite PMI for the euro zone dropped from 49.1 in December to 47.5 in January as, according to a statement by Chris Williamson, chief business economist at IHS Markit, “Output fell at an increased rate, led by worsening conditions in the service sector and a weakening of manufacturing growth to the lowest seen so far in the sector’s seven-month recovery.”
Williamson said that a double-dip recession seems “increasingly inevitable” for the euro zone.
Yesterday, the ECB agreed to maintain interest rates and its wider stimulus programs as “in this environment ample monetary stimulus remains essential,” Lagarde said.
The ECB believes the euro zone’s GDP will expand by 3.9% in 2021, and 2.1% in 2022.
France’s composite PMI for January was 47 (compared to 40.6 in the UK and 50.8 in Germany) although there were more employee hires over the month, the first increase in job numbers in nearly a year.
Eliot Kerr, economist at IHS Markit, said, “The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year.”
Yesterday, EU leaders “strongly discouraged” Europeans from non-essential travel and warned tougher restrictions on trips could come "within days” if measures to curb the coronavirus don’t measure up.
From Sunday, France will require a negative PCR test 72 hours before departure for most European arrivals “other than those on essential travel” while some countries within the EU will demand prior testing for non-essential cross-border road travel.
With further EU travel restrictions uncertain, Lufthansa’s CEO Carsten Spohr said yesterday that the company was “losing 1 million euros ($1.2 million) every two hours.”