European Economy Resilient as Countries Enter Lockdown Ahead of Holidays

By Mariliana Fotopoulou Wednesday, December 16, 2020

Certain aspects of the Eurozone economy significantly topped performance expectations in December but still shrank amid the second wave of the COVID-19 pandemic and fresh lockdown measures introduced across the old continent.

Positive Performance in November

The manufacturing sector was among the top industry performers, thanks to a surge in exports and improved performance in Germany. In contrast, the services industry continued its poor performance due to ongoing social distancing measures.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI), which serves as a reliable gauge of economic health, climbed to 49.8 this month from 45.3 in November, very close to the 50 figure which represents growth.

“The data hint[s] at the economy close to stabilis[h]ing after having plunged back into a severe decline in November amid renewed COVID-19 lockdown measures,” said Chris Williamson, a chief business economist at IHS Markit.

“The fourth quarter downturn consequently looks far less steep than the hit from the pandemic seen earlier in the year.”

Manufacturing PMI climbed to 55.5 from 53.8 as factories have not been affected as much by the ongoing restrictions. This is the highest level of manufacturing PMI has reached since 2018.

The private sector in Germany remained stable this month thanks to increased activity in the manufacturing sector and a recovery in services. Also, strong data from the manufacturing sector from Germany and France pointed to a sharp recovery in two of Europe’s largest economies.

But Chancellor Angela Merkel and the country’s officials are preparing an even stricter lockdown and have agreed to close the majority of stores and schools from Wednesday until January 10 in an effort to curb the spread of COVID-19 infections in the second wave.

The euro broke above $1.22 against the US dollar on Wednesday for the first time in more than two years as the Eurozone economy smashed consensus estimates and in part due to mild progress in Brexit negotiations. Furthermore, economic activity data from the last few months suggested that Europe has been outperforming the United States.

Italy and Germany Prepare for Lockdown Extensions

Elsewhere, Italy’s health ministry adviser has urged the government to drastically increase measures amid the pandemic to prevent a “national tragedy” after the country’s statistics bureau ISTAT stated deaths in the country this year are headed for World War II levels.

“We are in a war situation, people don’t realize it but the last time we had this many deaths, bombs were dropping on our cities during the war,” public health professor Walter Ricciardi said.

He added that the Italian government should place major cities under a complete lockdown. Italy has recently been considering tightening the measures during the upcoming holidays. Ricciardi said the country has been continuously late in reacting to the increasing number of infections amid the second wave.

On the same day when Germany decided to tighten measures, the record death toll was reported in the country. Deaths of 952 Germans have been reported on Wednesday, the highest one-day death toll since the outbreak, according to the Robert Koch Institute (RKI).

The country also reported 27,728 new COVID-19 infections. The RKI said the total number of infections is 1.38 million since the start of the pandemic, while the total death toll stands at 23,427.

The Institute added the infections are mostly hitting older groups, which are more likely to have more serious symptoms, but the infection rate is currently stable.

Also, the European Nation (EU) vaccine regulators said the endorsement for the Pfizer/BioNTech COVID-19 vaccine can be expected ahead thanks to constant pressure from the German Health Minister Jens Spahn.

This means that Germany could begin the immunization process by December 29.


The Eurozone economy recorded a strong performance, outstripping analysts’ expectations but still shrank due to poor numbers from certain sectors. Similarly, the Euro rose above $1.22 against the dollar for the first time since 2018.

Germany decided to extend its second lockdown and tighten the restrictions, while an adviser to Italy’s health minister urged the government to impose a complete lockdown as death toll numbers head toward World War II levels.

About the Author

Headshot for author Mariliana Fotopoulou

Mariliana has an MSC in consumer analytics and business strategy. She has a special interest in fast-moving industries and big data.

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