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Euro zone economy shrinks more in December than previously thought, but optimism rose for vaccine-led recovery – The Globe and Mail

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Two women speak outside a closed department store in Berlin on Jan. 5, 2021.

ODD ANDERSEN/AFP/Getty Images

Euro zone economic activity contracted more sharply than previously thought at the end of 2020 and could get worse this month as renewed restrictions to contain the coronavirus hit the bloc’s dominant service industry, a survey showed.

With infection rates soaring across Europe, countries have clamped down on public life. Germany is set to extend its strict lockdown until the end of the month and Italy decided on Tuesday to keep some nationwide restrictions in place.

With many businesses shuttered, unemployment surging and debt hitting record highs, the European Central Bank rolled out yet more stimulus measures last month to lift the currency bloc out of a double-dip recession.

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But the economy is expected to gain momentum later this year on vaccine hopes, a December Reuters poll found, and will return to pre-crisis levels within two years.

IHS Markit’s final December Composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, did rise to 49.1 from November’s 45.3 but was significantly below a flash reading of 49.8. Anything below 50 indicates contraction.

“In this coronavirus environment the PMI numbers are already out of date. We can expect much weaker GDP than what these PMI numbers would suggest,” said Bert Colijn at ING.

The services PMI registered 46.4 in December, better than the previous month’s 41.7 but far weaker than the 47.3 preliminary estimate.

A lockdown kept Germany’s services sector in contraction for a third month in a row in December and Italy’s remained deep in negative territory, significantly undershooting analysts’ expectations.

But French business activity came within a hair of returning to growth last month after a second coronavirus lockdown was lifted.

In Britain, outside the European Union, the economy made only a subdued return to growth in December after shrinking during a four-week England-wide coronavirus lockdown in November.

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A surge in infections there prompted Prime Minister Boris Johnson to set out a new, tougher lockdown on Monday. This will last until at least mid-February and economists think it will tip Britain back into recession.

With much of the euro zone’s service industry being forced to close, demand also shrank a lot more than thought. The final services new business index was 46.6 compared to the flash estimate of 47.9, albeit better than November’s 40.6.

But with vaccines being rolled out across the continent overall optimism about the year ahead improved. The composite future output index rose to 64.5 from 60.4, its highest reading since April 2018.

“We are in a darkness before dawn situation. There is light at the end of the tunnel but the tunnel is longer than we had initially expected,” Colijn added.

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Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

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Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

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Economy

Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

Published

 on


Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Stocks Could Have a Muted Year, Even if the Economy Booms – Barron's

Published

 on


Welcome to the Roaring ’20s. When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling.

Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. As a consequence, stock…

Let’s block ads! (Why?)



Source link

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