LONDON: Sondheim Theatre in London's West End. Britain's private sector activity shrank in January due to another coronavirus lockdown and the Brexit fallout, survey data showed Friday, placing the economy on course for a double-dip recession. - AFP

BRUSSELS: A slowdown in eurozone business activity accelerated in January, making a new recession almost certain as the Covid-19 pandemic continues to batter the economy, a key survey showed Friday. The closely watched PMI index compiled by IHS Markit is considered the earliest indicator of the state of the economy and the latest reading confirmed fears that the year-old virus crisis is still going strong.

"A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter Covid-19 restrictions took a further toll on businesses in January," Chris Williamson, chief business economist at IHS Markit, said. This meant that the economies of the 19 countries that use the single currency, dominated by Germany and France, would sink back into recession after only a very short recovery over the European summer.

The firm's closely watched PMI index fell from 49.1 points in December to 47.5 points this month, further away from the 50-point level which indicates growth. Williamson noted however that the bad start to 2021 would be less damaging than the economic collapse seen in the first wave of the pandemic last year. This was due to the "ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year," he said. The difference between France and Germany was notable.

German exports managed to keep the country narrowly on a growth trajectory, while French business activity sank. The situation for the rest of the eurozone, accounting for a little more than half of the bloc's economy, was even worse. Worryingly, employment across the eurozone fell for an eleventh consecutive month, albeit with modest increases in France and Germany, IHS Markit said. The bleak picture confirmed a warning by European Central Bank chief Christine Lagarde who saw "serious risks" still looming over the eurozone economy.

Much hope has been put in the distribution of vaccinations to reopen the economy but the campaign in the EU is going at a slower pace than hoped. The rollout of vaccines had instilled "a strong degree of confidence" but "the recent rise in virus case numbers has caused some pull-back in optimism," Williamson said. IHS Markit on Friday also posted an alarming survey result for Britain, where activity collapsed from a modest expansion in December to a low 40.6 points in January.

The country, which left the EU's single market on January 1, has seen a series of damaging lockdowns due to the spread of a more contagious strain of the virus. Meanwhile, Britain's private sector activity shrank in January due to another coronavirus lockdown and the Brexit fallout, survey data showed Friday, placing the economy on course for a double-dip recession. The composite purchasing managers' index (PMI) sank to an eight-month low at 40.6 points, compilers IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) said in a statement.

The shift below 50 -- indicating contraction-compared with 50.4 in December. "A steep slump in business activity in January puts the locked-down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards," said Chris Williamson, chief business economist at IHS Markit.

"Services have once again been especially hard hit but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports." Those delays were sparked after Britain finally departed the European Union's single market and customs union at the start of this year.

The economy had already suffered a historic recession in the first half of last year owing to an initial virus lockdown. Britain earlier this month imposed fresh curbs as the government sought to halt the spread of a more transmissible variant of the virus.

Markit on Friday said the speed of the January downturn was slower however than that in the first phase of the pandemic because many businesses had adapted and prepared for new restrictions, while sentiment was improved by vaccine rollouts. The composite PMI nosedived to 13.8 in April 2020. Friday's survey data also revealed that the steepest job losses in January were in hotels, restaurants, travel and leisure sectors. - AFP