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Monday, November 29, 2021

Britain outpaces eurozone as bloc held back by new Covid surge

Britain’s economy is outpacing the eurozone as supply shortages and Covid fears held back growth on the continent this month even before the latest restrictions came into force in Austria.

Demand is rising strongly in the UK, according to the purchasing managers’ index, an influential survey from IHS Markit, indicating the recovery has further to run.

The index held almost steady at 57.7 in November, compared to 57.8 in October. Any score of above 50 indicates growth in the private sector, so this suggests the expansion is being maintained, led by the services industry but supported by an acceleration in manufacturing.

This is stronger than the eurozone’s index which picked up to 55.8 from 54.2 in October.

Economists warned this may prove the high point for growth on the continent as surging Covid cases in countries including Germany and Belgium threaten to bring new restrictions.

Rising infections already appear to be affecting households’ spending patterns, hitting tourism and recreation spending, while supply problems dragged down car manufacturing, particularly important to countries such as Germany, for the third consecutive month.

However the survey also found rising production of household goods, technology and food and drink.

Melanie Debono at Pantheon Macroeconomics said: “We doubt November’s survey has captured the recent deterioration in the virus situation fully. With virus cases rising sharply in many of the major eurozone economies and restrictions returning in some, manufacturing still constrained by supply issues and the energy crunch rumbling on, it seems more likely than not that the PMI will soften in December and perhaps even heading into 2022.”

She predicts German growth of “little more than zero” in the final three months of the year, warning of growing “downside risks” to her forecast of 0.7pc for the eurozone as a whole.

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