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Euro zone business activity shrinks again as new Covid strains lead to more lockdowns

Euro zone business activity shrinks again as new Covid strains lead to more lockdowns

1/22/2021 12:06:00 PM

Euro zone business activity shrinks again as new Covid strains lead to more lockdowns

The euro zone saw another drop in business activity in January, on the back of stricter coronavirus-related lockdowns.

In addition to the new Covid variants, there are also concerns over aslow vaccination roll-outacross the European Union."In this environment ample monetary stimulus remains essential," Lagarde said. The ECB decided at a meeting on Thursday to

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keep interest rates and its wider stimulus programs unchangedfor now, having boosted its support in December.The ECB expects the euro zone's GDP (gross domestic product) to expand by 3.9% in 2021, and 2.1% in 2022. This is after a contraction of 7.3% last year. However, these forecasts are dependent on the evolution of the pandemic.

France hires moreEarlier, France's business activity data also came in at a two-month low, reflecting the imposition of stricter curfews across the country. The country's composite PMI for January was 47, making a contraction.However, French businesses hired more employees in January — the first increase in job figures in almost a year.

"The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year," Eliot Kerr, economist at IHS Markit said, in a statement.In Germany, business activity managed to grow slightly in January, with the flash composite output index coming in at 50.8. However, the reading represented a seven-month low for Europe's economic engine.

Phil Smith, associate director at IHS Markit, highlighted a slower momentum in manufacturing activity in the country, and a continued hit to the services sector during January."All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come," he said.

The German government decided some days ago to extend the national lockdown until Feb. 14. Read more: CNBC »

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