Enterprise exercise within the eurozone has slid again into decline, in line with a widely-watched survey, as rising coronavirus infections and tighter curbs weigh on the bloc’s economic system, rising strain on the European Central Financial institution to contemplate extra financial stimulus.

The IHS Markit flash eurozone composite buying managers’ index fell to 49.4 in October, its lowest stage since June and down from 50.4 within the earlier month. A studying under the 50 mark signifies a majority of companies reported a contraction in exercise in contrast with the earlier month.

The drop was pushed by a contraction in companies exercise, which was steeper than economists had anticipated, though it was partly offset by resilience in manufacturing.

Analysts mentioned the information signalled that the eurozone’s latest financial rebound was dropping steam.

“The eurozone is at elevated threat of falling right into a double-dip downturn as a second wave of virus infections led to a renewed fall in enterprise exercise in October,” mentioned Chris Williamson, chief enterprise economist at IHS Markit.

The bloc faces “a story of two economies”, as producers loved the quickest development since early 2018 as orders surged amid rising world demand, he mentioned, however “intensifying Covid-19 restrictions took an rising toll on the companies sector, led by weakening demand within the hard-hit hospitality trade”.

The index for eurozone companies fell to a five-month low of 46.2, down from 48 in September. Economists polled by Reuters had anticipated a studying of 47.

Providers exercise fell in Germany and France, the eurozone’s two largest economies, because the sector bore the brunt of latest restrictions and of weak client confidence as job losses continued to rise. 

In distinction, exercise continued to develop within the eurozone’s manufacturing trade; the sector’s index rose greater than anticipated to 54.4, up from 53.7 in September.

The efficiency was patchy, nevertheless. A pointy rebound in exports, notably to a resurgent China, helped to spice up exercise in Germany’s massive manufacturing sector, however French producers reported their steepest falls in export orders since July.

Germany’s composite PMI dipped to 54.5, indicating that total enterprise exercise continued to develop because the speedy development in manufacturing offset the slowdown in companies. Nonetheless, France’s composite studying slumped to a five-month low of 47.3, pointing to a sharper slowdown in financial exercise.

The figures elevate strain on the ECB to contemplate extra financial stimulus when policymakers meet subsequent week. Its president Christine Lagarde mentioned this week that the resurgence of the pandemic was “a transparent threat” for the economic system. Nonetheless, the central financial institution is predicted to attend till December earlier than increasing its bond-buying plans.

“The highway forward for the eurozone might be bumpy,” mentioned Nicola Nobile, economist at Oxford Economics. “Exercise within the companies sector contracted strongly, persevering with with a pattern that began after the summer season . . . This dynamic will very possible proceed within the coming months, given the sharp rise in instances throughout Europe over the previous few weeks.”

Governments throughout Europe have this month tightened restrictions on folks’s social exercise and motion because the variety of infections has hit document highs in a number of international locations.

Nonetheless, most international locations have avoided closing colleges, building websites or non-essential factories — a lot of which have been shut throughout the first wave — in an effort to keep away from the financial affect of stricter lockdowns.

Jack-Allen Reynolds, economist at Capital Economics, mentioned he anticipated eurozone “financial exercise will stagnate” within the fourth quarter, however the unfold of the virus regardless of the newest restrictions meant “the dangers are skewed to the draw back”.

Flash PMI estimates are printed one week earlier than the ultimate outcomes and are primarily based on about 85 per cent of the standard responses.