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Lockdowns have driven euro zone economy into a double-dip recession, according to a survey

DUBLIN: Economic survey reveals that the pandemic-linked lockdowns have pushed the euro zone economy into a double-dip recession. But widespread vaccination expectations and optimism have driven the country to a three-year peak, the survey said.

The reported cases of coronavirus remained high across 19 countries in Europe. So the hospitality sector and entertainment venues were forced to close. Governments encouraged citizens to stay at home.

However, the IHS Markit’s final February Composite Purchasing Managers’ Index (PMI), which is considered a good measure of financial health, recorded growth. The PMI rose to 48.8 from January’s 47.8. It was above the flash reading of 48.1 but below the 50 mark that marks growth. The increase was driven by record growth in production as most factories opened.

“A fourth successive monthly drop in business activity puts the euro zone economy on course for a double-dip recession,” said Chris Williamson, chief business economist at IHS Markit.

“While many hospitality-based companies in the service sector continue to struggle due to COVID related restrictions, manufacturing is faring well and alleviating the overall economic impact of lockdown measures,” he added.

The euro zone economy contracted in the first two quarters of 2020. Last month’s Reuters poll of economists predicted that this would continue in the fourth quarter and the current quarter.

Delays in the European Union’s vaccine release and concerns about new corona virus variants leading to current lockdowns have stalled economic activity. They also pointed out that this and unemployment are serious threats.

A PMI for the dominant services industry rose to 45.7 last month. Ahead of the January 45.4 and 44.7 flash estimates. This is much lower than the breakeven. This is the first time this has happened since last February. The service employment index rose to 50.2 from 49.8.

The EU’s inoculation campaign was hurt by delays in promised deliveries, rollout delays and some social resistance. However, the eurozone hopes that all of this will be resolved. It raises the composite future output index, which measures optimism, from 64.2 to 67.0.

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