Home / World Economy / World Economy News / Covid-19 Surge Forces Europeans to Stay Home, Dragging on Economy

Covid-19 Surge Forces Europeans to Stay Home, Dragging on Economy

Europe’s service providers reported a fresh decline in activity as a surge in coronavirus infections in October pushed consumers to avoid face-to-face services ranging from entertainment to eating out, a contrast with Asian countries such as China, which continued to see a rebound.

Data firm IHS Markit said its services Purchasing Managers Index for the eurozone fell to 46.9 in October from 48.0 in September. A reading above 50.0 indicates that activity is increasing, while a reading below points to a decline.

The October measure indicates services activity in the currency area has declined for two straight months, with an even sharper fall likely in November after a number of European countries imposed tight restrictions on economic and social life.

“With lockdown measures being tightened, it is becoming increasingly hard to see how the eurozone economy will avoid falling back into decline,” said Chris Williamson, IHS Markit’s chief business economist. “For all countries the outlook has grown increasingly dark.”

The fall in services in Europe underscores the continuing divide between countries that rely more heavily on in-person activities and those oriented toward manufacturing the goods — from furniture to toys — that consumers are snapping up.

In Europe, services represent almost three quarters of activity. Many Asian countries are instead more geared toward exports of manufacturing goods, with services accounting for just over half of all activity in China.

Spain saw the largest drop in activity during October. Figures released Tuesday by the country’s statistics agency showed how severely its key tourism sector has been hit by the pandemic, with spending by foreign visitors in the first nine months of the year down 89.9% on the same period in 2019.

A similar survey of Chinese service providers painted a very different picture. With the spread of the coronavirus largely contained, service providers reported the second-largest increase in activity for a decade, with the PMI rising to 56.8 from 54.8 in September.

The surge in new infections across Europe has led to the announcement of fresh lockdowns in a number of countries that are less restrictive than the measures taken in April but are likely to suppress services activity even more in November.

Surveys of purchasing managers indicated that even before those new restraints bite, service providers were facing a weakening of consumer demand, particularly in Spain, which relies heavily on tourism to power economic growth.

But where restrictions are easing, as in India, the services sector is rebounding, while manufacturers in many countries are also enjoying a strong pickup.

Figures released over recent weeks show that the global economy came back strongly in the three months through September from the huge declines in output recorded in the second quarter, while not making up all of the losses suffered during the most stringent period of lockdown in most countries.

But with new restrictions being put in place to combat rising infections in some parts of the world, the pace of the economic recovery is expected to slow significantly during the final three months of the year.

In India, where restrictions have been eased even as infections remain high, service providers reported an increase in activity for the first month since February, as the PMI rose to 54.1 from 49.8. However, service providers reported difficulties persuading their staff to turn up for work.

“Survey participants indicated that workers on leave had not returned and that a widespread fear of Covid-19 contamination continued to restrict staff supply,” said Pollyanna De Lima, an economist at IHS Markit.
Source: Dow Jones

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping