LONDON: The euro zone economic recovery weakened this month, despite an upturn in Germany where factories benefited from an easing in supply chain bottlenecks, as renewed restrictions put a dent in the bloc’s dominant services industry, a survey showed.
With the Omicron coronavirus variant sweeping across Europe governments have been encouraging citizens to stay home and avoid socialising while soaring prices have discouraged consumers from spending.
IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as good gauge of overall economic health, dropped to 52.4 in January from 53.3 in December, its lowest since February and below the 52.6 predicted in a Reuters poll.
That headline number was affected by the services PMI, which dropped to a nine-month low, although it remained in growth territory.
With customers staying home, growth in demand for services almost dried up. The new business index sank to its lowest reading since April last year just before parts of the economy reopened after a stricter lockdown.
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“The small decline in the flash Composite PMI in January shows that Omicron has taken a toll on the services sector, although the German economy performed surprisingly well,” said Bert Colijn at ING.
Businesses in Germany Europe’s largest economy, expanded at their fastest pace in four months, earlier data showed, as factories enjoyed an easing in supply chain bottlenecks.
But in France the only other euro zone country to report preliminary numbers, business growth dipped more than forecast as the impact of COVID-19 and inflationary pressures weighed on activity. That suggests the bloc would have stumbled further without Germany’s strength. In Britain outside the euro zone and the European Union, activity cooled unexpectedly to an 11-month low but cost pressures stayed high, leaving the Bank of England on track to raise interest rates next week.
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