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The increasing number of infections and stricter corona measures weigh on European growth. Consumers in particular are failing.
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Of new infection wavef in Europe weighs on economic activity in the eurozone. The composite PMI (indicator of purchasing directors) falls from 51.9 in August to 50.1 in September, research firm IHS Markit announced in a flash estimate. Since 50 is the boundary between contraction and growth, the expansion has virtually come to a standstill.
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There is a two-speed economy in Europe.
Chris Williamson
Economist at Markit
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The services sector is particularly striking, as it is even in shrinking mode. The PMI for the services sector drops from 50.5 in August to 47.6 in September. Economists had expected a stable figure. This shows that European consumers are still reluctant to go to the shops for fear of contamination with the corona virus. In addition, the stricter corona measures do not make it any easier to consume.
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This is a wake-up call.
Bert Colijn
Economist at ING
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Economist Bert Colijn calls the PMI figure an alarm bell for European governments and the European Central Bank (ECB). ‘Although new measures were mainly local and relatively mild compared to the measures in March, we see that the economy is already suffering from the increase in the number of infections. This shows that human behavior related to the fear of the virus is an important factor in determining economic activity. This is a wake-up call for policymakers, if they needed it. ‘
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New threat
And now there is another new threat that can slow down consumption: new corona measures. In winter, the number of people who catch the flu or cold increases. They think they may have been infected with the corona virus. According to economists, this means that the test capacity become overloaded. Testing and detection is an important tool in the fight against corona and if that option cannot be used adequately, governments will take stricter corona measures.
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Two speeds
There is also good news about the figure. Because the sub-indicator for industry rises from 51.7 to 53.7, while economists had only foreseen an increase to 51.9 points. This shows that it is at least able to continue its recovery with the European industry.
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“There is a two-speed economy,” said IHS Markit economist Chris Williamson. “There we see that factories report higher demand, especially from the export markets, but where the larger services sector is suffering from lower demand due to increasing virus concerns.”
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The stock markets seem to focus mainly on the better industry figure, because they are going higher.
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