Rolling coverage of the latest economic and financial news, as the coronavirus pandemic hits growth in UK and eurozone
- Latest: growth across UK firms has slowed this month
- Markit’s PMI shows slowest growth since June
- Eurozone companies are shrinking again
- Service sector hit by Covid-19 restrictions
Newsflash: the UK economy is slowing this month, as tighter Covid-19 restrictions hit travel, leisure and hospitality companies.
Data firm Markit reports that business activity has increased so far this month, but at a much slower rate than September – and at the slowest pace since June.
This reflected a much weaker contribution from the service economy, with survey respondents often commenting on tighter restrictions across the hospitality sector and the impact of local lockdowns on general consumer spending.
As a result, service providers reported a decline in new business for the first time since June, which contrasted with another solid expansion in new orders received by manufacturing companies in October.
Survey respondents overwhelmingly suggested that the latest setback for service sector output was due to a renewed downturn across the travel, leisure and hospitality industries amid tighter restrictions on trade and local lockdown measures.
Bert Colijn, senior economist at ING, agrees that the eurozone could be dragged into a dreaded ‘double-dip recession’ by the tighter restrictions on hospitality venues like bars, restaurants and gyms.
The most restrictive measures taken so far have hit the recreational sector more than other parts of the economy. That impacts the service sector disproportionally. The same holds true for the change in behaviour among the population, as services require more in person interaction and rely more on personal consumption.
From here on, the path for the economy is highly uncertain. With cases continuing to rise at a worrying pace, more restrictive measures in the eurozone definitely cannot be ruled out.