Italian and Spanish services activity hits six-month low - Financial Times

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Economic activity in Spain and Italy’s services sector has hit a six-month low according to a widely watched business survey, as consumer companies bear the brunt of lockdowns to battle the spread of coronavirus.

Italy’s IHS Markit purchasing managers’ index for services fell for the third consecutive month to 39.4 in November, while the Spanish index fell for the fourth consecutive month to 39.5.

A reading below the 50 mark indicates that a majority of businesses reported a contraction in activity from the previous month.

The fall in activity in Spain was smaller than expected by most economists, but in Italy it was more severe than most had predicted.

New coronavirus restrictions which have closed bars, shops and restaurants and led to widespread job cuts are likely to cause a double-dip economic downturn in the final three months of this year, economists have warned.

The services sector accounts for about three-quarters of eurozone output and jobs.

However this autumn’s declines in activity are shallower than during the first wave of the virus in the spring and news of a vaccine has boosted expectations for next year across much of Europe, with optimism about the future highest among Spanish services companies, according to IHS Markit.

Across the eurozone, the final services PMI reading was revised up slightly on Thursday, from its earlier flash reading of 41.3 to 41.7. Flash survey readings are published a week before the final index and generally contain up to 95 per cent of the total responses.

Chris Williamson, chief business economist at IHS Markit, said the eurozone economy had “slipped back into a downturn in November as governments stepped up the fight against Covid-19”.

“However, this is a decline of far smaller magnitude than seen in the spring” as “manufacturing has so far continued to expand. and the service sector is also seeing a much shallower downturn than during the first lockdowns”, he added.

PMI readings published earlier this week for Europe’s manufacturing sector suggested its activity continues to expand, as supply chains have remained relatively unscathed and exports are rebounding. 

Mr Williamson said this offered hope for the coming months: “It’s anticipated that business and consumer spending will start to rise as the outlook brightens, though a high degree of caution is expected to persist for some time to come.”

IHS Markit revised its final eurozone composite PMI reading up slightly to 45.3, but that was still a sharp decline from 50 in October and its lowest since May.

Many services companies, such as airlines, hotels, retailers and hairdressers, rely on human contact and so have been hit hardest by the restrictions on people’s social interaction and movement imposed to contain the spread of coronavirus.

France’s final services PMI was revised up slightly, contributing to a slight improvement in the country’s final composite reading to 40.6. The German services index dipped slightly from its flash reading, leading to a slight decline in its final composite score of 51.7, but that still left it as the only major economy in overall expansion.

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Italian and Spanish services activity hits six-month low - Financial Times
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