Eurozone growth slows as omicron hits services: IHS Markit

While average prices charged for goods and services meanwhile rose a rate unsurpassed in the series so far, an easing of producer input cost inflation hinted at a cooling of upward raw material price pressures, the London-based company said in a press release.

The headline IHS Markit Eurozone composite purchasing managers’ index (PMI) dropped for a second month running at the start of 2022, down from 53.3 in December to 52.4 in January, according to the flash estimate.

The latest reading indicates the slowest rate of output growth since the recovery from lockdowns in early 2021 began last March. However, the slowdown masked wide variations in performance by sector. Service sector output growth slowed sharply for a second month running, dropping to its lowest since last April, amid soaring COVID-19 infection rates.

The rapid spread of the omicron variant led to the reimposition of many measures to contain the virus in recent weeks, notably in Germany, France, Italy and Spain, which adversely affected consumer- and hospitalityoriented businesses in particular.

According to IHS Markit’s COVID-19 containment index, restrictions in January have risen to their tightest since May of last year across the eurozone. Companies also often reported that staff absenteeism due to illness or the need to self-isolate also inhibited activity.

Manufacturing growth meanwhile accelerated to the fastest since last August. Although staffing issues curbed output in some factories, supply constraints eased, helping boost production in many firms.

Average supplier delivery delays lengthened to the least extent since January of last year, with fewer items reported in short supply and shipping delays showing signs of easing. Growth was recorded in all major manufacturing sectors, including a second consecutive month of rising production in the auto sector.

By country, business activity rebounded in Germany after a slide into mild contraction in December, registering the strongest expansion since September thanks to a surge in factory production and a return to growth for the service sector. In contrast, growth in France hit the lowest since April, reflecting a near-stalled factory sector and a sharply weaker service sector performance, IHS Markit said.

Meanwhile, growth ground almost to a halt across the rest of the region as a whole amid a renewed contraction of services activity.

The survey gauge of new orders signalled a further expansion of demand, albeit at the slowest rate since the upturn began last March. While new orders for goods increased to the greatest extent since last August, inflows of new business into the service sector slowed to near-stagnation.

Manufacturing jobs growth hit the highest since last July, close to all-time highs, though service sector jobs growth waned to the lowest since last May. Overall, the rise in employment was identical to that seen in December.

Average selling prices measured across both manufacturing and services meanwhile picked up to grow at a rate matching the survey all-time high recorded in November. A new record was seen in the service sector as costs were driven higher by energy and wage costs.

Prices charged for goods leaving the factory gate also rose at an increased rate, just shy of November’s survey high, though an easing in manufacturers’ input price inflation to the lowest since last April was also reported, linked in part to the alleviating supply crunch.

ALCHEMPro News Desk (DS)