Eurozone economy on course for double-dip recession

The eurozone economy is on course for a double-dip recession as the coronavirus pandemic takes its toll, according to a survey released on Wednesday.

The IHS Markit composite purchasing managers’ index - which measures activity in the manufacturing and services sectors - printed at 48.8 in February, up from the flash estimate of 48.1 and above January’s reading of 47.8, but still below the 50.0 mark that separates contraction from expansion.

The purchasing managers’ index for the services sector came in at 45.7 in February compared to a flash estimate of 44.7 and January’s reading of 45.4.

Manufacturing saw its strongest output expansion in four months, driven by strengthened demand from domestic and international sources. However, the services sector, and in particular those areas affected the most by Covid restrictions, recorded another marked contraction in activity.

Chris Williamson, chief business economist at IHS Markit, said: "A fourth successive monthly drop in business activity puts the eurozone economy on course for a double-dip recession, though an easing in the rate of decline underscores how the latest downturn appears far less severe than the initial hit from the pandemic last year.

"While many hospitality-based companies in the service sector continue to struggle due to Covid-19 related restrictions, manufacturing is faring well and alleviating the overall economic impact of lockdown measures. Even some hard-hit parts of the service economy are showing greater resilience than last year, suggesting some adaptation to the constraints of social distancing.

"However, it’s becoming clear that many virus-fighting measures will need to be in place for some time to come, in part due to the slow vaccine roll-out. This could extend the drag on the economy from the pandemic into the second half of the year and subdue the pace of recovery."