Euro zone activity shrank in Jan, services hit

Economic activity in the euro zone shrank significantly in January.

Lockdown restrictions to contain the pandemic hit the bloc's dominant service industry particularly hard.

Hospitality venues have been forced to close across much of the continent, prompting a sharp contraction in IHS Markit's PMI survey on Friday (Jan 22).

Overall the survey, seen as a good guide to economic health, fell further below the 50 mark separating growth from contraction, hitting 47.5 in January.

That was down from December's 49.1.

Chris Williamson, chief business economist at IHS Markit, said "a double-dip recession for the euro zone economy is looking increasingly inevitable".

A PMI covering the service industry dropped to 45.0 from 46.4.

But the survey revealed manufacturing remained strong as factories largely remained open.

The manufacturing PMI held well above breakeven at 54.7, albeit slight weaker than December's figure.

A Reuters poll this week showed the bloc's economy is expected to grow 0.6% this quarter.

And will return to its pre-crisis level within two years on hopes the rollout of vaccines will allow a return to some form of normality.