The eurozone’s economic recovery ground almost to a halt in September, as a renewed fall in service sector activity countered faster manufacturing growth.

The IHS Markit Composite PMI output index, a GDP-weighted average of the manufacturing and service sector survey gauges, fell from 51.9 in August to 50.4, signalling only a mild increase in business activity.

While the survey continues to indicate that the economy rebounded strongly over the third quarter as a whole, thanks to a strong surge at the start of the quarter (after business activity contracted sharply during the height of the Covid-19 pandemic in the second quarter), the rebound lost almost all of its momentum as the third quarter progressed. As such, the survey indicates an increased risk of the economy sliding back into contraction in the fourth quarter.

Spain suffers greatest hit, only Germany shows resilient recovery

A downturn in service sector activity during September was widely blamed on a second wave of virus infection rates in many countries, with social distancing restrictions curbing recreation, leisure, travel and tourism activities in particular.

Spain’s service sector was especially hard-hit. With the exception of the March-to-May period at the height of the first wave of infections, Spain’s service sector collapse in September was the largest recorded since November 2012.

However, renewed service sector downturns were also recorded in France, Italy and Ireland, while a near-stalling was recorded in Germany, underscoring the broad-based geographical spread of the worsening service sector picture.

Furthermore, due to the relatively large size of service sectors compared to manufacturing, the weakening of the former exerted a marked toll on overall business activity. Output in France, Spain and Ireland consequently contracted in September, and remained broadly stagnant in Italy. Of the four largest eurozone member states, only Germany saw a robust overall expansion of

Members of the Spanish Military Emergencies Unit (UME) wearing protective gear prepare to disinfect the Lope de Vega Cultural Center in the Vallecas neighbourhood where rapid antigen test for COVID-19 were conducted to residents of the area, on September 30, 2020 in Madrid.

oscar del pozo/Agence France-Presse/Getty Images

FRANKFURT, Germany (AP) — Unemployment rose for a fifth straight month in Europe in August amid concern that extensive government support programs won’t be able keep many businesses hit by coronavirus restrictions afloat forever.

The jobless rate rose to 8.1% in the 19 countries that use the euro currency in August, up from 7.9% in July, official statistics showed Thursday. Some 13.2 million people were unemployed and the number of those out of work rose by 251,000.

Economists expect a further rise as wage support programs expire, while an increase in infections in many countries has increased fears that some restrictions on business interaction may have to be re-imposed.

Some 3.7 million people are still on furlough support programs in Germany, the eurozone’s largest economy. The government has extended its emergency support through the end of 2021. National governments have poured in fiscal stimulus in the form of support loans and guarantees for business, while the European Central Bank has launched a 1.35 trillion euro ($1.57 trillion) monetary stimulus in the form of regular bond purchases with newly printed money through at least the middle of next year. That has helped keep financial markets calm and credit flowing to businesses.

But all those measures have not halted a wave of corporate announcements of job reductions. Companies in the hardest hit industries such as airlines, tourism and restaurants may face a long period of substantially diminished demand for their services and are laying off workers. The coronavirus in some cases has also accelerated