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Coronavirus affects euro area economy

21 Feb 2020 03:31 PM

Manufacturing activity in euro area slump eases in February, missing expectations for a further contraction due to the outbreak of the Corona virus and reducing the chances of some bloc economies facing a technical recession.

The Eurozone Manufacturing PMI rose to 49.1 in February, up from 47.9 in the previous month, above expectations at 47.5. While this is still below the 50 level, indicating that most companies recorded a contraction in activity, they are the highest value since February 2019.

Meanwhile, the dominant services sector in the single currency area remained resilient, pushing overall business activity to six months high. The services sector PMI reading increased to 52.8 in February from 52.5 the previous month, pushing the composite index marginally to 51.6.

Although many companies were disrupted in various ways by the Corona virus, the effect of the disease caused supply problems and showed some signs of travel and tourism numbers. The data corresponds to an increase in economic output at a quarterly rate of 0.1% in the first quarter, unchanged from the last quarter of 2019.

On the other hand, the improvement in industrial activity was largely driven by the easing of the prolonged recession in Germany, the region's largest industrial producer and the euro zone country most economically exposed to China. Germany's improved manufacturing PMI reading of 47.8, up from 45.3 the previous month, surprised investors who expected the country to get a bigger hit from the outbreak of the Corona virus.

Most sectors succeeded in registering steady growth, despite the continuing uncertainty regarding the trade relations between UK and the EU after the exit. The Manufacturing PMI increased from 50 to 51.9 points, while the service sector, which represents about 80% of the economy, continued to grow by 53.3 points.

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