Eurozone PMI reaches four-month high in June but coronavirus still weighs on activity
The eurozone economic downturn has slowed for the second successive month, but the pandemic continues to weigh on wider economic activity.
IHS Markit’s Eurozone purchasing managers’ index (PMI) rose to 48.5, up nearly 17 points from May’s 31.9. It is the index’s best level in fourth months and is higher than the earlier flash reading of 47.5. Anything below 50 indicates a contraction.
Country level readings show all countries in the eurozone enjoyed their best month since February. France’s reading climbed to 51.7, while Spain moved close to stabilisation at 49.7.
The services PMI reading also reached a four-month high as it continued to recover ground from a record low in April. It rose to 48.3 from 30.5 in May but given it still remains below 50 it indicates challenges remain for the industry.
As units start to reopen and firms welcome staff back from furlough, operating expenses started to rise for the first time since February. Margins were therefore under some pressure as firms “chose to discount their own charges in response to the challenging business environment”.
Chief business economist at IHS Markit, Chris Williamson said: “The headline eurozone PMI surged some 17 points in June, a rise beaten over the survey’s 22-year history only by the 18-point gain seen in May. The upturn signals a remarkably swift turnaround in the eurozone economy’s plight amid the COVID-19
pandemic.”
“Having sunk to an unprecedented low in
April amid widespread business closures to fight the
virus outbreak, the PMI has risen to a level indicative
of GDP contracting at a quarterly rate of just 0.2%,
suggestive of strong monthly GDP gains in both May
and June.”
The latest unemployment rate for the eurozone reached a for-month high of 7.4 per cent, but economists ha expected it to rise to 7.7 per cent. The slim increase suggest furlough schemes, providing temporary layoff, are keeping many of those laid off during the crisis out of the main figures. The number of jobless claims are rising in Italy, and have inched higher in France and Germany.
“However, despite the vigour of the return to work
following COVID-19 business closures, we remain
cautious as to the strength of any longer-term
recovery after the immediate rebound.”