Eurozone manufacturing sector returns to growth but worries remain
The Eurozone manufacturing sector performed better than expected as it returned to growth in July as the currency bloc continued to recover from the spring’s coronavirus crash, survey data showed today.
The IHS Markit Eurozone manufacturing purchasing managers’ index (PMI) rose to 51.8 in July from 47.4 in June. It was above a flash estimate of 51.1. A score of above 50 indicates expansion.
It was the first time the PMI had risen above the 50 no-change mark since February 2019. Economists have said the survey data can be misleading at times of high uncertainty, however, arguing that the sector is likely to have grown in May and June after it was all but shut in April.
The biggest rise in production in over two years and a rebound in new orders drove the recovery in Eurozone manufacturing, data firm IHS Markit said.
Spain had the strongest-performing manufacturing sector in July. However, coronavirus cases have recently jumped in the country, potentially posing a threat to its economic recovery.
Solid gains were seen in Austria and France. Germany and Italy registered more modest growth. But Greece and the Netherlands both had PMI readings below the 50 no-change level.
Employment a concern for Eurozone manufacturing
“Eurozone factories reported a very positive start to the third quarter,” said Chris Williamson, chief business economist at IHS Markit.
“Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains.”
However, Williamson flagged that employment remains a “major concern”. July was the 15th successive month in which firms have cut jobs, the survey data showed.
IHS Markit said July’s job-shedding was “again considerable and historically sharp”. The survey data also showed that firms continued to operate below capacity.
“Increased unemployment, job insecurity, second waves of virus infections and ongoing social distancing measures will inevitably restrain the recovery,” Williamson said.
Despite various causes for fear, business confidence continued to recover last month, hitting its highest level since January.