By Paul Hannon By Kim Mackrael 

The U.S. economy picked up momentum at the start of the year, while Europe showed a growing risk of a second recession amid tougher restrictions to contain coronavirus infections, surveys of purchasing managers showed.

Factories and service-industry companies indicated a pickup in U.S. business activity early this month, the forecasting firm IHS Markit said Friday. An index of manufacturing activity increased to 59.1, the highest level in more than a decade, while a measure of service-sector activity reached 57.5.

A figure above 50 indicates the sector is expanding, based on factors such as product sales, hiring and output. A figure below 50 indicates contraction.

Rapid growth in new recorded coronavirus cases over the winter led to tougher restrictions on activity in parts of the U.S. and Europe, restraining the global economic recovery after the sharp downturn last spring.

Part of the difference between the U.S. and European performance in January might be the result of more severe lockdowns that were imposed in Europe this month compared with the U.S., said Chris Williamson, chief business economist at IHS Markit.

"Tighter lockdowns, effective lockdowns, come at an economic price and we're seeing that," Mr. Williamson said.

He added that expectations of another round of fiscal stimulus under the Biden administration could be another factor contributing to a stronger performance in the U.S. President Biden has proposed a $1.9 trillion economic relief package that includes additional direct payments to households and extended unemployment benefits.

The eurozone economy has suffered a weak start to the year, with high coronavirus infection rates and government restrictions increasing the risk of a second recession since the pandemic first struck last year.

The European Central Bank on Friday said that 20 economists at banks and research institutes it had surveyed between Jan. 7 and Jan. 11 estimated that the eurozone economy shrank 2.5% in the final three months of 2020 and would likely stagnate in the first three months of this year. If those estimates prove correct, the eurozone would very narrowly avoid a second recession.

"The rollout of vaccines, which started in late December, allows for greater confidence in the resolution of the health crisis," ECB President Christine Lagarde said. "However, it will take time until widespread immunity is achieved, and further adverse developments related to the pandemic cannot be ruled out."

New Covid-19 outbreaks across the globe have weighed on economic activity, damping recovery expectations in the first half of the year. Vaccination campaigns, however, have raised hopes for a stronger rebound in the second half.

In the early months of the year, a number of large economies face the threat of declining output as restaurants, cinemas and a wider range of businesses that involve close physical proximity are closed or have had their activities severely curtailed.

IHS Markit said its composite Purchasing Managers Index, which measures both manufacturing and services activity, for the eurozone fell to 47.5 in January from 49.1 in December.

The tightest lockdown since April had a particularly chilling effect on the U.K.'s economy, which saw the largest drop in its PMI of those released Friday. Germany separately continued to record an expansion.

In Japan, a similar survey pointed to a bigger contraction in the services sector.

Write to Paul Hannon at paul.hannon@wsj.com and Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

January 22, 2021 11:28 ET (16:28 GMT)

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