Euro Area: Downturn in activity eases markedly for second consecutive month in June on lockdowns relaxation
June 23, 2020
The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, recovered additional ground in June fueled by easing containment measures. It rose to 47.5 in June from May’s 31.9 and thus moved further away from April’s all-time low. That said, the PMI remained below the 50-threshold that distinguishes expanding business activity from contracting business activity in the Eurozone.
The services sector recorded the most pronounced improvement in the month, while manufacturing activity recovered ground to a lesser extent. The fall in output, new orders and employment in both sectors moderated considerably from May. Moreover, business sentiment also strengthened notably and moved into optimistic terrain for the first time in four months. That said, activity in the travel, tourism, hotels and restaurants industries continued to be severely impacted by social distancing measures.
Assessing the Eurozone’s two largest economies, France led the improvement as output returned to growth for the first time since February thanks to soaring manufacturing production; meanwhile, Germany’s composite PMI regained substantial ground but remained in contractionary terrain, however following a milder downturn than in France.
Commenting on the release, Chris Williamson, chief business economist at IHS Markit said:
“with the timing of a return to normal still
something that can only be speculated upon, and virus-related restrictions likely to continue to hit many businesses for the rest of the year, we remain very cautious of the strength and sustainability of any economic rebound.”
Meanwhile, Carsten Brzeski, Eurozone chief economist at ING, stated:
“Today’s PMI numbers provide further evidence of what initially looks like a textbook v-shaped recovery. As much as more than a month of (full) lockdowns had sent economies into a standstill, the gradual reopenings of the last two months have led to a sharp rebound in activity. However, it is anything but certain that the eurozone economy can maintain this momentum. Higher unemployment, companies going out of bust, as well as plans to further cut back on staff and falling orders, suggest that the current ‘v’ -shaped recovery could quickly run out of steam.”