At the end of last year, the slowdown in the European economy was more pronounced than the preliminary data showed due to the pandemic. This was revealed today by the IHS Markit organization’s final report, whose index rose in December but remained below the critical limit of 50 points. This is the dividing line between growth and decline inactivity. In Germany, the aggregate index is above 50 points, but the dominant services sector remains subdued, as in the euro area as a whole.
Economy in Europe after pandemic
The aggregate Purchasing Managers’ Index (PMI), which includes industry and services activity, rose to 49.1 points in December in the European economy from 45.3 points in November. However, it is significantly below the preliminary figure, which stated a value of 49.8 points.
The situation could worsen again as some countries introduce new restrictive measures to curb the spread of coronavirus. This has devastating effects, especially on the service sector, which is dominant in Western Europe. For example, Germany has decided to extend the strict closure until the end of January.
In Germany, the country that has one of the best economies in Europe, December’s aggregate index rose to 52 from 51.7 points in November, but the initial December value showed 52.5 points. The sub-index for the services sector in Germany rose to 47 from the previous 46 points in November. Here, too, it is worse than the preliminary report, which showed an index of 47.7 points.
“In particular, activity in the services sector has fallen much more than estimated in the original report, as more countries have stepped up the fight against the growing number of outbreaks,” said IHS chief economist Markit Chris Williamson by Reuters.
The PMI sub-index for the services sector in the euro area rose to 46.4 in December from 41.7 points in November. The original estimate for December was 47.3 points. However, the manufacturing industry is already in the growth phase, where the sub-index rose to 55.2 from the November value of 53.8 points, the final report of IHS Markit showed on Monday. Even here, however, the activity is weaker than the original estimate – it showed the value of the partial index of 55.5 points.
“The worse may yet come before things start to improve. We got the latest data from the survey before there were reports of a new and more contagious strain of the virus,” Williamson added. The coronavirus mutation appeared in England and had already spread to other countries, which won’t help to European economy as well. According to experts, it can spread much faster than the original variant, but Europe has already started vaccinating.