Euro-Area Activity Drops to Nine-Month Low on Resurgent Virus

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Euro-area economic activity slowed as rising coronavirus cases hurt service providers to offset an improvement in manufacturing output. Inflation pressure eased a little.

A composite gauge for both sectors fell to 53.4 in December from 55.4 the previous month, according to a survey of purchasing managers by IHS Markit published Thursday. Services activity grew at its weakest since April as people avoided tourism and other recreation.

The data come with the European Central Bank poised to decide later Thursday how to withdraw billions of euros of pandemic stimulus while safeguarding the continent’s economic recovery through the latest wave of Covid-19.

IHS Markit said industry-output growth picked up this month -- partly thanks to an easing of supply constraints that also “cooled” inflation pressures -- though increases in new orders weakened.

“Most notably autos production has risen for the first time since August,” said Chris Williamson, chief business economist at IHS Markit.

Still, overall activity was particularly affected in Germany, where the economy stalled for the first time in a year and a half. Other countries also saw a broad-based slowdown.

“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,” Williamson said. “Looking ahead, the Omicron variant poses further downside risks to the growth outlook.”

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