Euro-Area Economy Weakened by Lockdowns, Supply Constraints
A pedestrian walks near a closed restaurant terrace in Berlin. (Photographer: Liesa Johannssen-Koppitz/Bloomberg)

Euro-Area Economy Weakened by Lockdowns, Supply Constraints

Business activity in the euro-area economy shrank for a fourth month in February as services struggled with continued lockdowns and factories ran into increasing supply constraints.

A composite gauge for both sectors stood at 48.1, slightly higher than in January but still below the 50 mark that separates expansion from contraction. Services deteriorated at the fastest pace since November, while manufacturing output rose the most in four months.

Euro-Area Economy Weakened by Lockdowns, Supply Constraints

The region’s factories have been a stronghold through the crisis as they adapted more easily to health and safety restrictions than businesses relying on face-to-face interactions.

Confidence in the outlook has improved. Companies across the region are “becoming increasingly upbeat about recovery prospects,” said Chris Williamson, chief business economist at IHS Markit.

“Assuming vaccine roll-outs can boost service sector growth alongside a sustained strong manufacturing sector, the second half of the year should see a robust recovery take hold,” he said.

What Bloomberg Economics Says...

“These readings confirm that while strict containment measures are taking their toll on the economy, the impact remains a lot more contained than in the spring.”

--Maeva Cousin, senior economist. Read the EURO-AREA REACT.

The euro rose on the strength of the manufacturing readings and relative robustness in Germany, and was up 0.4% at $1.2144 at 12:00 a.m. Frankfurt time.

Still, factories are increasingly facing challenges amid trade bottlenecks. Delivery delays rose to near record levels, pushing input costs to the highest in nearly a decade.

©2021 Bloomberg L.P.

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