Eurozone business bounces but sees Omicron variant stumble

Eurozone business bounces but sees Omicron variant stumble

LONDON Reuters business activity accelerated last month but the bounce may be temporary as demand growth weakened and fears about the Omicron coronaviruses variant put a dent in optimism, a survey showed on Friday.

IHS Markit's Flash Composite Purchasing Managers' Index PMI, a good gauge of overall economic health, rose to 55.4 in November from 54.2 in October, below an earlier 55.8 flash estimate, but still above the 50 mark separating growth from contraction.

Chris Williamson, chief business economist at IHS Markit said that the improvement in the rate of economic growth indicated by the euro zone PMI looks likely to be short-lived.

Not only did demand growth weaken, but firms' expectations of future growth fell as worries about the pandemic intensified again. The business index dropped to 54.7 from 55.1, its lowest reading since April.

The final PMI for the bloc's dominant service industry increased to 55.9 from 54.6, but that was well below the preliminary estimate of 56.6.

The business expectations index, which measures optimism about the year ahead, fell to 66.7 from 69.0, its lowest level since February.

As Europe battles another wave of coronaviruses, governments have imposed restrictions and the World Health Organization said on Monday that the Omicron variant had a very high risk of infection surges.

With the data collected prior to the Omicron variant, sentiment about near-term prospects will have to be knocked even further, Williamson said.

The factory PMI showed growth accelerated slightly last month, but supply chain bottlenecks worsened, causing a cap on output, and driving the cost of raw materials up at the fastest rate in over two decades, and has a bigger impact on services than manufacturing.