The Threat Behind Europe’s Economic Recovery

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  • The Purchasing Managers’ Index from IHS Markit, a key gauge of the economy, rose in November after slipping to a six-month low in October, according to data released Tuesday.
  • But expectations for the future are darkening.
  • Austria announced last week that it’s going back into a national lockdown.

A return of coronavirus cases in Europe is raising concerns that the region’s successful economic recovery from the epidemic could be threatened by another harsh winter as reported by CNN.

Business decline

So far, the new Covid-19 wave has had just a minor influence on corporate activity in the eurozone’s 19 member countries.

However, the outlook for the future is dimming.

Last week, Austria stated that it would revert to a countrywide lockdown.

“A greater expansion of business activity in November defied experts’ projections of a decline, but it is unlikely to prevent the eurozone from seeing slower growth in the fourth quarter,” said Chris Williamson, IHS Markit’s senior business economist.

“Based on what we’ve seen in the last several months, I’m guessing it’ll be smaller.”

The eurozone’s economic production plummeted by 6.3%, compared to 3.4% in the United States.

Stagnation ahead?

According to Jessica Hinds, Europe analyst at Capital Economics, “a lot now hinges on how the scenario unfolds in Germany.”

To return to work on Wednesday, German employees must provide a negative Covid test, confirmation of immunisation, or proof of recovery from the virus.

They may not be paid if they are unable to work from home.

On Wednesday, government officials are expected to debate fresh steps.

The German industrial sector is also under stress, as supply chain issues continue to plague automakers and other manufacturers.

France may impose additional Covid-19 limitations after reporting more than 30,000 new infections on Tuesday, the highest amount since early August. On Wednesday, government officials are expected to debate fresh steps.

Aside from coronavirus outbreaks, Europe is coping with the consequences of China’s economic slowdown, rising inflation, and an energy supply shortage that might raise business costs and make it more expensive to heat homes this winter.

This could have a broader impact on consumer spending.

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Source: CNN

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