Eurozone Activity Slows Down as Germany Is Set to Extend Lockdown Into December

By Adriana Anastasiades Monday, November 23, 2020

The German government is reportedly considering extending its nationwide lockdown in December as the number of people infected by the coronavirus remains high. The Eurozone economic and business activity has started to suffer again as certain indicators fell to the lowest levels since the spring.

An Extension of Lockdown Is Very Likely

The German government remains optimistic that the situation concerning the virus will improve due to the recent coronavirus vaccine developments. However, the lockdown measures will have to be extended in the short-term.

“There will be an extension,” said Olaf Scholz, German Finance Minister.

The meeting between Chancellor Angela Merkel and other officials is scheduled for Wednesday, where the country’s leaders will discuss whether the lockdown should be extended. Some believe that the government should extend the restrictions for a few more weeks until the end of the Christmas holiday season.

Minister-President of Bavaria and leader of the Christian Social Union Markus Söder said that the country should keep hotels and cinemas closed until December 20, as well as prohibit alcohol and fireworks in public squares on New Year’s Eve.

“The wave has been broken, but unfortunately the number of new infections is not coming down. Instead, intensive care units continue to be swamped and the death toll rises,” Söder said. “Therefore we cannot give the all-clear.”

According to Robert Koch Institute, 10,864 new coronavirus cases were registered on Monday, amounting to a total number of infections of 929,133 in the country. The number of those who died from the virus in Germany is 14,112 now, which is somewhat lower compared to other European countries.

“After a temporary stabilization of case numbers at a higher level in late August and early September, there is currently an increase of transmission within the population in all federal states,” the RKI said.

Economic Activity Slows Down Again

Following the reintroduction of new measures to curb the spread of the second wave, economic activity in Europe declined again this month. However, the positive news about the vaccine has provided the companies with a much-needed confidence boost regarding the future outlook.

The Purchasing Manufacturing Index (PMI), which tracks both manufacturing and services markets, was at around 45.1 this month, its lowest level in the past six months.

“The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections,” said Chris Williamson, head business economist at IHS Markit.

Upon the reimposition of social restrictions last month, the economic activity was mostly hit in the services sector as the new measures forced non-essential shops to shut down and reintroduce curfews.

Williamson also pointed out that the new restrictions are different from those imposed after the coronavirus outbreak in the spring and emphasized that the economic shock now was smaller than the one during the first wave.

“There’s a broader picture here, which is the global nature of the lockdown back in the spring. So what we had there was a synchronized lockdown and that meant that was literally no demand anywhere, but now you’ve got pockets of very strong rebounding demand.”

But the reintroduction of new measures has helped curb the spread of the second wave, which is why some European countries are already set to slowly begin lifting them, as they’re attempting to avoid a third wave of new infections over the coming several weeks.

“The further downturn of the economy signalled for the fourth quarter represents a major set-back to the region’s health and extends the recovery period,” Williamson added.

He also said that IHS Markit estimated that the GDP would shrink by 7.4% this year and projected an economic expansion in 2021 of just 3.7%.

Summary

German officials hope that the vaccine can soon be launched for mass use following the outstanding trial data from Pfizer-BioNTech and Moderna.

However, the lockdown measures are likely to get extended into December, which could create additional pressure on economic activity. According to the latest data, the reimposition of restrictions across Europe has sent economic activity in the Eurozone to its lowest level in six months.

About the Author


Headshot for author Adriana Anastasiades

Adriana is a Journalist with a passion for reporting on business leadership, with a diverse interest in multiple industries.

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