The American economy lost some strength in December due to a peak in the number of viral infections, while the European economy stagnated due to the relaxation of a number of restrictions.
Factory and service surveys showed that the US manufacturing industry grew at a steady pace earlier this month, according to the company’s forecast.
IHS Markit
said Wednesday. But growth was the lowest in about three months. The index for manufacturing decreased to 56.5 and the index for services to 55.3.
The number over 50 shows that the industry is growing, measured by factors such as product sales, new employees and production.
A new wave of coronavirus infections this winter has prompted some states and cities to downsize or close down businesses. Economists expect these restrictions to affect growth when households return to restaurants and shops. Meanwhile, U.S. retail sales declined 1.1% in November, marking the second monthly decline after months of growth, according to the Department of Commerce.
So far, the largest economy in the world seems to have overcome its last inhibitions.
It is encouraging to see that producers are optimistic about production prospects for the coming year, although the pandemic and economic uncertainty are lowering expectations compared to November, Markit told the IHS.
In Europe, some restrictions have been relaxed. Surveys of purchasing managers on Wednesday showed that the economy stabilized at the beginning of December as industrial production continued to rise. But until the coronavirus pandemic is stopped, further setbacks are possible.
Surveys in Europe have shown that businesses are encouraged by the prospect of widespread deployment of effective vaccines by 2021 and that they are cutting jobs at the slowest rate since the start of the pandemic.
Since September, the European economy has been hit by a wave of contagion and, since mid-October, governments have imposed new restrictions that have effectively shut down much of the hotel sector.
Economists believe that these constraints will push the eurozone economy back into recession in the last quarter of this year, after a strong recovery in the third quarter following a sharp fall in output in the first half of the year.
Some of these restrictions were relaxed at the beginning of December, and surveys of public procurement officials show that the decline in service activity has slowed down considerably as a result. In recent days, however, these restrictions have already been reviewed in parts of Europe and tightened as of Wednesday in Germany.
According to IHS Markit, the eurozone composite purchasing managers index rose from 45.3 in November to 49.8 in December.
The production indicator continues to recover strongly and reaches its highest level in 31 months. Service providers have been more directly affected by the recent wave of new infections, but December figures for this sector show the slightest decline in activity since September.
There are also signs that companies are looking ahead to 2021 with more confidence. French companies hired more workers in the first month since February, while job losses have decreased elsewhere.
The companies are increasingly optimistic about the coming year and the vaccine launches should help bring business back to more normal commercial conditions as we approach the year 2021, he said.
Chris Williamson,
Chief economist at IHS Markit.
Similar studies in Japan and Australia also point to improved performance in the manufacturing sector, while in Australia, in response to the easing of restrictions and optimism about the effect of the vaccines, the activity of the case studies has increased over the coming year.
Bars and restaurants in Paris have been closed as part of the national blockade of the French economy.
Photo:
gonzalo fuentes/Reuters
In response to rising infections, the European Central Bank last week announced a new stimulus plan and said it expected the Eurozone economy to contract 2.2% in the last three months of the year. She has lowered her growth forecast for next year, but raised her forecast for 2022.
The prospect of introducing the vaccine gives greater confidence that the health crisis will be gradually resolved, he said.
Christine Lagarde,
the President of the ECB. However, it will take some time to achieve widespread immunity, while the possibility of a recurrence of the infection cannot be ruled out, causing public health and economic problems.
Throughout the pandemic, the fate of different European countries has been very different. Surveys show that the German economy continued to grow in the first weeks of December, while France contracted. According to IHS Markit, production in other parts of the Eurozone has declined.
The UK economy started to grow again in the first weeks of December, supported by a robust services sector and a further surge in manufacturing activity, as businesses built up stocks to avoid disruptions when the new EU trade rules came into force in January.
In recent years, purchasing managers’ indices have become important indicators of the direction the global economy could take. But in the current economic downturn, where small businesses are hardest hit, the PMI figures may not tell the whole story. WSJ explains. Photo: Getty Images (originally published July 1, 2020)
Email Paul Hannon at paul.hannon@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com.
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