Europe’s business activity slowed to an 11-month low in January as the Omicron virus weighed on the services sector, said IHS Markit in the Composite Purchasing Managers Index (PMI) flash report.
Nonetheless, the Eurozone’s economy is still in growth territory, with the January PMI coming in at 52.4 compared to 53.1 in December.
Manufacturing sector grows
There is a bright spot in Europe’s manufacturing sector, where growth picked up to a five-month high at 55.8 in January compared to 53.8 in December. Price inflation pressures are easing as supply chains smooth out, said the analysts.
Eurozone business activity growth slowed for a
IHS Markit
second successive month in January as the spread
of the Omicron variant took an increasing toll on the
region’s economy. Although an alleviation of supply
chain delays provided a welcome boost to
manufacturing production, renewed COVID-19
restrictions led to a marked slowing in service
sector growth
Consumer spending dropped steeply amid lockdowns and other COVID-19 restrictions around Europe.
Tourism and recreation activity consequently fell at
IHS Markit
a rate not seen since last February, with
transportation and media work also in decline.
However, many other business service providers
and financial services firms continued to report solid
growth, being less affected by the Omicron wave
than consumer-facing industries.
Investors punish lockdown stocks
While Europe’s economy struggles to keep its head above water, in the US, investors expect tighter monetary policy and have punished lockdown stocks amid weaker earnings, said Hussein Sayed, chief market strategist at Exinity.
“Lockdown-beloved stocks are being punished the most, with Netflix plunging 21.8% on Friday after the streaming giant anticipated weak subscription growth as competition heated up from Disney and other players. A day earlier, shares of Peloton Interactive, the provider of at-home exercise equipment, lost 24% of its value after the company said it was reviewing the size of its workforce and other reports of halting production due to falling demand. Zoom, the video conferencing software maker, is now trading at a fraction of its 2020 peak, having lost 74% of its value since.”
Hussein Sayed
Omicron infection rates skyrocketed in December but are showing signs of slowing down in some areas of the world. In the US, officials say the wave is subsiding and in the UK, the government recalled workers who were working from home. In Cyprus, the number of infections peaked at just over 5000 per day, and in the last few days, there have been under 2000 infections per day.
