Enterprise within the Eurozone drops to a six-month low after new coronavirus lockdowns


Champs-Elysees Avenue and the Arc de Triomphe can be seen after the Christmas lights were turned on on November 22, 2020 in Paris, France.

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LONDON – Economic activity in the Eurozone fell again in November after governments put new lockdowns and social restrictions in place to contain the further spread of the coronavirus.

However, news that a Covid-19 vaccine could soon be ready for distribution has made companies more confident about returning to their normal levels of activity in the next 12 months.

The Eurozone's composite PMI composite output index, which tracks activity in both manufacturing and services, was 45.1 in November, its lowest level in six months and down from 50 in October.

A value below 50 means a decline in business activity.

"The eurozone economy fell sharply again in November as renewed attempts to tackle the rising tide of COVID-19 infections," Chris Williamson, chief economist at IHS Markit, said in a statement.

Amid a second wave of coronavirus cases in the fall, many European nations tightened social restrictions in October, which again weighed on their economies. The economic shock was felt again particularly in the service sector, where non-essential businesses were closed, movement restrictions and curfews were imposed.

Speaking to CNBC's Street Signs on Monday, Williamson stated that the nature of the recent lockdowns is different from those put in place earlier this year and that the economic shock has been slightly less.

"There's a broader picture here that is the global nature of the spring lockdown. What we had there was a synchronized lockdown, and that meant that literally wasn't asked for anywhere, but now you have bags with very strong rebound calling for" , he said.

However, the decisions to introduce new bans have also contributed to an increase in new cases.

As a result, European leaders plan to lift some of the restrictions in the coming weeks, albeit very gradually.

This is because some nations are still grappling with high numbers of daily infections and leaders want to avoid a third wave of new cases in just a few weeks.

"The further economic downturn announced for the fourth quarter represents a significant setback to the health of the region and extends the recovery period," said Williamson, adding that IHS Markit foresees a 7.4% decline in GDP (gross domestic product) in 2020 and only an expansion of 3.7% in 2021.

France: companies adapt

In France, where President Emmanuel Macron will speak on Tuesday, non-essential stores are expected to reopen in early December, but movement restrictions will remain in place for some time.

Economic activity in France fell to a six-month low in November due to the reintroduction of a national lockdown. However, the economic shock was less severe than that caused by the first shutdown in the spring.

The French composite output index for flash PMI stood at 39.9 in November, with activity in services declining more than manufacturing.

"These results suggest that some French companies have been able to adapt their operations to the new conditions and are consequently less prone to large declines in activity when more stringent restrictions are imposed," said Eliot Kerr, economist at IHS Markit , in a statement.

Germany: manufacturing resilience

In the meantime, the German economy has again shown stronger signs of resilience towards its European colleagues.

The German Flash PMI Composite Output Index was 52 in November – the lowest level in five months, but still positive.

Manufacturing activity saw "strong growth" while the service industry was slightly negative.

"The resilience of manufacturing, which the survey shows is particularly beneficial for growing sales to Asia, supports our view that a decline in the final quarter is likely to be far less than in the first half," said Phil Smith, deputy director at IHS Markit, on Monday.

He added that the latest vaccine news has lifted sentiment in German companies that are now expecting a return to normal in the next 12 months.

"This appears to have been a contributing factor to recent employment figures, which show that factory jobs are nearing stabilization and payrolls for services are rising," he said.


Katherine Clark