Eurozone economy on track for double-dip recession

A new survey by IHS Markit showed that the eurozone’s economic recovery stalled last month due to a second wave of Covid and the related restrictions, which crushed activity in the bloc’s dominant service industry.

HS Markit’s final Composite Purchasing Managers’ Index (considered a good gauge of economic health) dropped to 50.0 last month, from September’s 50.4.

The 50 mark, which separates growth from contraction, was dragged down by the services PMI, which fell to 46.9 from 48.0 – its lowest since May, when the first wave of the virus was sweeping across Europe. All that points to an upcoming double-dip recession in the 19-country bloc, the report said.

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“Service providers have been hit especially hard, led by intensifying weakness in consumer-facing sectors such as hospitality, offsetting the brighter news seen in manufacturing during the month,” said Chris Williamson, chief business economist at IHS Markit.

He added: “With lockdown measures being tightened, it is becoming increasingly hard to see how the eurozone economy will avoid falling back into decline. For all countries the outlook has grown increasingly dark.”

According to the official data, the eurozone economy declined 11.8 percent in the second quarter, expanding by a much-better-than-expected 12.7 percent in July-September after many lockdown restrictions were eased.

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IHS Markit said the business expectations index tumbled to 54.2 from 59.2, while it had mostly been lower only this year and during the last two financial crises.

The European Central Bank, which had already pumped in unprecedented stimulus, said last week it will take new action in December to contain the growing fallout.

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