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Euro zone recovery stuttered in January as Omicron hit services

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The euro zone economic activity increased at its slowest pace in almost a year as infections of the Omicron strain put another dent in bloc’s dominant services activity, a survey showed on Monday, according to Bloomberg.

IHS Markit‘s Flash Composite Purchasing Managers’ Index, seen as a gauge of overall economic health, dropped to 52.4 in January from 53.3 in December, its lowest since February.

Areas to suffer the most from the highly transmissible Covid-19 variant included tourism, travel and recreation. But, despite the disease boosting staff absences, many factories managed to lift output as shipping delays and component shortages abated.

“The omicron wave has led to yet another steep drop in spending on many consumer-facing services,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

While it’s putting a dent in Europe’s pandemic rebound, policymakers at the European Central Bank don’t see omicron derailing the recovery altogether and have mapped out an exit from crisis-era stimulus. Business activity picked up in January in Germany, the continent’s largest economy, according to IHS Markit.

“Prices for goods and services are rising at a joint-record rate as increasing wages and energy costs offset the easing in producers’ raw material prices, dashing hopes of any imminent cooling of inflationary pressures,” stated Williamson.