Hopes Of Recovery Ignited By Significant Slowing Of Downturn In Euro Zone In June

The economic downturn in the euro zone because of the hit to economic activities by the novel coronavirus pandemic continued to show signs of recovery in June. The latest data released on Tuesday gave a clear indication of the current economic health of the region as it slowly opens up its economies to business activities from strict lockdown measures imposed to curtail the spread of the novel coronavirus pandemic.

In June, the flash purchasing manager’s index (PMI) data which is used for measuring activity in both the services and manufacturing sector in the euro zone rose to touch 47.5 compared to a value of 31.9 in May for the region. The 50-point mark I the index separates contraction from expansion. According to estimates of economists, the flash June PMI was expected to come in at 42.4.

IHS Markit said in its data release that the growth of 15.6-point in June was by far the largest in the survey history except for the rise in May which still is the record high.

“The latest gain took the PMI to its highest since February, though still indicated an overall decline in business output. Output fell again in both manufacturing and services, the latter showing the slightly steeper rate of decline. Both sectors nevertheless reported markedly reduced rates of contraction for a second month running,” it said.

The continued downturn in output in the region was related to a fourth consecutive monthly deterioration in inflows of new business, according to IHS Markit, “which in turn contributed to a further steep decline in backlogs of orders for companies to work through.” However these factors continued to moderate in June which indicates that the next month’s indices could signal further improvement in the numbers.

The data “indicated another substantial easing of the region’s downturn in June,” said IHS Markit’s Chief Business Economist Chris Williamson.

“Output and demand are still falling but no longer collapsing,” he continued. “While second-quarter GDP is still likely to have dropped at an unprecedented rate, the rise in the PMI adds to expectations that the lifting of lockdown restrictions will help bring the downturn to an end as we head into the summer.”

Entire industries across the eurozone were forced to shut down completely because of the pandemic induced restrictions and the latest data also provides markets another signal of the extent to which countries in the euro zone are currently recovering from the lockdown and restrictions.

In May, a three month high was recorded for the single currency area in terms of business activity with a record increase in the final composite PMI (which includes both manufacturing and services) at 31.9 from a low of 13.6 in April.

Other indicators reported previously about the condition of economic health of the region were augmented by Tuesday’s data.  There was continued improvement in June in the flash consumer confidence data for the euro zone and wider European Union as reported on Monday. However the area of concern is the recent unemployment data particularly among the young population of the region.

(Adapted from CNBC.com)



Categories: Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Sustainability, Uncategorized

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