Euro zone economy coping better with second lockdown: ECB

FRANKFURT: Europe's second lockdown is taking a smaller toll on the economy as many firms have adapted and manufacturing is proving largely immune due to strong export demand, the European Central Bank said on Wednesday based on a survey of large businesses.

All euro zone nations have put curbs on activity to slow the spread the coronavirus pandemic and the economy shrank by 0.7% last quarter, the third negative reading in the past four quarters.

"Businesses were better able to maintain production -- through testing, screening and home working -- while consumers had become increasingly familiar with online sales platforms," the ECB said based on a phone survey of over 50 large companies in January.

Export oriented manufacturers enjoyed the best prospects with firms in industries like steel, chemicals, automotive and electronics all reporting expanding production, sales and orders, exceeding in some cases their pre-pandemic levels, the ECB said in an Economic Bulletin article.

"Several contacts in these industries said that their businesses were now operating at, or close to, full capacity and/or that limits to production were now primarily on the supply side," the ECB said.

Pricing pressures also improved with consumer goods manufacturers, retailers and business services providers described their pricing environment as stable.

Retailers made better use of online platforms but that was still not enough to compensate for brick and mortar sales while much of the services, particularly tourism and entertainment, was close to being fully shut down.

Overall employment was also likely to trend downward due to lower sales but much of this can be managed with voluntary redundancies and early retirement, the ECB added.

Firms expected little improvement in the current quarter and while hopes were clearly pinned on vaccines but uncertainty was high on whether business restrictions could be lifted in the second quarter or later.