Eurozone: Omicron slowed economic recovery in December

Eurozone economic recovery slowed in December as a new wave of coronavirus cases reduced growth in the mainstream services sector, according to research by IHS Markit.

European countries, especially Germany, reintroduced case-reduction measures last month, with the Omicron variant spreading rapidly late last year.

The IHS Markit Composite Responsible Procurement Index, which reflects the performance of manufacturing and service companies, fell to 53,3 points from 55,4 in November. This is the lowest level since March, but higher than the limit of 50 points which is the threshold between increase and decrease of activity.

"The acceleration in production growth we saw in November was unfortunately short. "The proliferation of the Omicron variant has had a particularly strong impact on the service sector, reflecting a renewed reluctance on the part of customers," said Joe Hayes, an economist at IHS Markit. "As the eurozone countries face the latest pandemic developments, it is clear that the risks to the economy are now greater as stricter restrictions are likely to be imposed to limit its spread. Covid-19 "than it was recently," he added.

The PMI is at an eight-month low

The PMI for the services sector fell to an 8-month low of 53,1 from 55,9 in November.

The weaker demand and the threat on the horizon for new restrictions led to the increase in the staff of service companies at the lowest rate since May, with the employment index falling to 53,6 points from 55,4 in November.

The manufacturing PMI showed that its activity remained strong in December and that a easing of supply chain bottlenecks somewhat reduced price pressures. However, the composite input price index remained high at 74,1 points, although lower than the 76 points in November. Respectively, the output price index decreased but remained high.

"Regarding inflation, there is nothing that gives special joy. "Even though there has been a marginal easing of price pressures, we are still in extremely hot ground - the increases in both input and output costs were the second largest ever," Hayes said.