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Euro zone business slump eased in June as lockdowns relaxed — PMI

People wearing protective face masks walk on the main shopping street in Munich, Germany during the coronavirus crisis on April 30 2020.

Alexander Hassenstein/Getty Images

The plunge in euro zone business activity caused by lockdowns imposed to stop the spread of the coronavirus eased sharply last month as more businesses reopened and people ventured out, a survey showed on Friday.

Around 11 million people have been infected by the virus globally, but as the number of daily reported cases has fallen across much of Europe governments have loosened their restrictions on people’s movement.

IHS Markit’s final Composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, bounced to 48.5 in June from May’s 31.9. That was better than a 47.5 preliminary reading and close to the 50-mark separating growth from contraction.

“The upturn signals a remarkably swift turnaround in the euro zone economy’s plight amid the Covid-19 pandemic,” said Chris Williamson, chief business economist at IHS Markit.

“An improvement in business sentiment meanwhile adds to hopes that GDP growth will resume in the third quarter.”

A June Reuters poll predicted that the economy contracted an unprecedented 12.5% last quarter but would grow 7.9% this quarter. 

Activity in the bloc’s dominant service industry also almost returned to growth last month. Its PMI soared to 48.3 from 30.5, comfortably ahead of the 47.3 flash reading.

However, demand still fell despite vendors cutting prices, and firms reduced headcount for a fourth straight month. The services employment index rose to 43.9 from 37.9, still one of the lowest readings in the survey’s 22-year history.

“Companies continued to report weak underlying demand in June. Many remained risk averse, being reticent to commit to spending and hiring due to persistent uncertainty as to the economic outlook,” Williamson said.

But optimism about the year ahead returned. The composite future output index climbed back into positive territory, recording 56.9 versus May’s 46.8.

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