Service sector activity continued to rebound in April, even in parts of the world such as India and Europe, where significant restrictions remain in place to contain Covid-19.
The resilience of the sector underlies hopes that 2021 will see a strong rebound in global economic activity, as immunization programs reach a larger share of the world’s population, albeit at very different rates across economies. developed and developing.
The worst-affected Indian states have responded by imposing further restrictions on households and businesses. Nonetheless, a survey of purchasing managers released on Wednesday indicated that activity in India’s service sector slowed in April, but did not decline. This contrasts with more extensive lockdowns a year earlier, when India experienced one of the world’s steepest declines in service activity.
When combined with a similar survey of manufacturers on Monday, the survey suggests India’s economy may still be growing, although other restrictions may have a bigger impact on economic activity. are probable.
“There is any possibility of further tightening of state-level restrictions beyond this month,” said Darren Aw, economist at Capital Economics. “This would weigh heavily on service activity in particular, while the impact on income and the need for social distancing will weigh more heavily on demand.”
The European services sector has been one of the hardest hit by the pandemic, but there are signs that in some countries activity has started to pick up. A survey of Spanish purchasing managers recorded the first increase in activity since July, reflecting preparations for an expected easing of restrictions as the vaccination program progresses.
Service providers have said they are hiring additional workers for the first time since the start of the pandemic.
“Business and customer confidence that there will be a surge in economic activity once immunization programs are in place is increasing,” said Paul Smith, economist at IHS Markit.
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French service providers have also reported a return to growth, in their case for the first time since August. But like elsewhere, activity in hotels and restaurants – the businesses that have been among the hardest hit by the pandemic – continued to decline.
The lifting of restrictions in the hospitality and tourism sectors, as vaccination programs reach the majority of European adults, is expected to lead to a strong recovery in the economy in the second half of the year.
However, some economies have yet to see a recovery in the service sector. Activity in the service sector in Italy fell more sharply in April than in March, while in Germany activity fell again, after increasing in March.
This is one of the main reasons why the eurozone economy has lagged behind the United States in the six months to March, and is expected to do so again this quarter. Similar surveys for the United States to be released later Wednesday should point to another month of strong growth in the services sector.
Write to Paul Hannon to paul.hanno[email protected]
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