June 28, 2022

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Euro Zone Business Growth slipped In Dec As Omicron Rose

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LONDON, Dec 16 (Reuters) – Euro zone business growth has slowed more than expected this month as renewed restrictions imposed to curb the Omicron coronavirus variant curtail the recovery in the bloc’s dominant services industry, a survey showed on Thursday.

Europe is facing a fourth wave of infections and many governments have been encouraging citizens to stay home and avoid unnecessary social contact.

IHS Markit’s Flash Composite Purchasing Managers’ Index, a good indicator of overall economic health, dropped to 53.4 in December from 55.4 in November, its lowest since March and below the 54.0 predicted in a Reuters poll.

That headline number was dragged down by the services PMI, which sank to an eight-month low of 53.3 from 55.9. While above the 50-mark separating growth from contraction it missed the Reuters poll estimate for 54.1.

“The euro zone economy is being dealt yet another blow from COVID-19, with rising infection levels dampening growth in the service sector in particular to result in a disappointing end to 2021,” said Chris Williamson, chief business economist at IHS Markit.

Growth in demand for services dropped to its lowest since April – when it contracted – with the new business index falling to 52.6 from 54.2.

Factories, generally less affected by coronavirus restrictions, also suffered somewhat and the manufacturing PMI dipped to a 10-month low of 58.0 from November’s 58.4. An index measuring output that feeds into the composite PMI nudged up to 53.9 from 53.8.

In one brighter spot for policymakers at the European Central Bank, who meet later on Thursday, price pressures abated although remained high. The input prices index eased to 87.0 from 88.9, and the output prices index staged an even bigger fall.

“Easing supply constraints have alleviated some of the upward pressures on inflation,” Williamson said.

The ECB is set to halve the amount of assets it buys each month from April, according to a Reuters poll of economists, although interest rate increases are likely years away.

But as the vaccine roll-out continues apace, optimism about the year ahead improved. The composite future output index recovered to 66.5 from 66.1.

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