Omicron Hit Service: Eurozone recovery stumbled in January as PMI

London — Eurozone economic recovery weakened this month, despite a turnaround in Germany where factories benefited from easing supply chain bottlenecks as new regulations hit Block’s dominant service industry. rice field.

As variants of the Omicron coronavirus spread throughout Europe, the government urged citizens to stay home and avoid socializing, and soaring prices have discouraged consumer spending.

HISMarkit’s Flash Composite Purchasing Managers’ Index is considered a good indicator of overall economic conditions, dropping from 53.3 in December to 52.4 in January, the lowest since February and predicted by Reuters research. It is below 52.6.

The number of headings was influenced by the service PMI. This remained in the growth zone, but fell to its lowest level in nine months.

With customers at home, the growth in demand for services was almost exhausted. The new business index has fallen to its lowest level since April last year, just before part of the economy resumed after a severe blockade.

“A slight drop in the flash composite PMI in January shows that Omicron has hit the service sector despite the surprisingly strong German economy,” said ING’s Bart Colin. increase.

German companies, Europe’s largest economy, grew at the fastest pace in four months. According to previous data, factories enjoyed mitigating supply chain bottlenecks.

Workers will wear protective masks at the Volkswagen assembly line after VW reopens Europe’s largest car factory after the coronavirus outage in Wolfsburg, Germany on April 27, 2020. (Swen Pfoertner / Pool via Reuters)

However, in France, the only other eurozone country that reported tentative figures, business growth exceeded expectations as the effects of COVID-19 and inflationary pressures weighed heavily on activity.

This suggests that without German power, Brock would have stumbled further.

In the UK, outside the euro area and the European Union, activity unexpectedly cooled to 11-month lows, but cost pressures remained high and the Bank of England remained on track to raise interest rates next week. I did.

Farther away, Japanese factory activity grew at the fastest pace in four years, but the service industry suffered as the number of coronavirus cases surged, leaving the private sector as a whole for the first time in four months. It was reduced to.

Price pressure

Consumers were also hit by soaring prices. The Eurozone Comprehensive Output Price Index is in line with the November survey highs, which could put pressure on the European Central Bank to tighten policy after last month’s inflation set a new record.

However, the factory is less susceptible to restrictions and remains mostly open. Block’s manufacturing PMI has risen to a five-month high of 58.0 to 59.0, well above the 57.5 Reuters poll estimates.

The exponential measurement output jumped from 53.8 to 55.8. The output measurements are fed to the composite PMI, and the significant increase shows how much the decline in service affected the overall activity.

“The main news from the release is that manufacturers are once again aware of mitigation of supply chain problems. After some signs of cautious improvement in December, things improved significantly in January. “Colijn said.

To meet strong demand, the factory rapidly increased its workforce. The employment index soared from 55.3 to 57.5, the highest since July.

In a Reuters poll last week, more than two-thirds of economists said that Omicron variants have a milder economic effect than Delta.

The compound future output index has been fine-tuned to the highest level since the beginning of the Omicron wave.

Andrew Kenningham of Capital Economics said:

Jonathan Cable