LONDON: The eurozone's recovery from its deepest economic downturn on record hit the brakes in August, particularly in services, as pent-up demand unleashed by the easing of coronavirus lockdowns dwindled, a survey showed on Friday. To contain the spread of the virus, which has infected over 22.5 million people globally, governments imposed strict lockdowns - forcing businesses to close and citizens to stay home, bringing economic activity to a near halt.
After many of those restrictions were relaxed, activity in the eurozone expanded in July at the fastest pace since mid-2018. But as infection rates have risen again in parts of the region, some earlier curbs have been reinstated. So in data likely to concern policymakers and diminish hopes for a V-shaped recovery, IHS Markit's flash Composite Purchasing Managers' Index sank to 51.6 from July's final reading of 54.9, below all forecasts in a Reuters poll that predicted no change.
"The fall back in the eurozone composite PMI in August suggests the initial V-shaped rebound following the lifting of the lockdowns is already fizzling out," said Jessica Hinds at Capital Economics. The flow of incoming new business for firms slowed and once again some of August's activity was derived by businesses completing backlogs of work.
Germany and France, the bloc's two biggest economies, also lost economic momentum this month, driven by the services slowdown. Apart from those economies, activity in the bloc decreased marginally in August, IHS Markit said.
Growth in the eurozone's dominant service sector stalled, with that PMI plummeting to 50.1 from 54.7, below all forecasts in the Reuters poll which predicted a small dip to 54.5. Factory activity - which didn't suffer quite as sharp a decline as the service industry during the height of the pandemic - expanded for a second month. An index measuring output, which feeds into the composite PMI, rose to 55.7 from 55.3.