Andrey Rudakov | Bloomberg | fake pictures
Business activity in the euro zone rebounded in July, according to preliminary data, as tight coronavirus blockades were further relaxed and more people returned to work.
In June, the region had already shown signs of a recovery with PMIs (Purchasing Managers Index) reaching 47.5, an increase from 31.9 in May. A reading below 50 indicates an economic contraction. However, the July number exceeded this threshold, reaching 54.8, indicating that economic activity grew for the first time since February.
“Businesses across the euro area reported an encouraging start to the third quarter, with output growing at the fastest rate for just over two years in July as locks continued to ease and economies reopened. The The lawsuit also showed signs of revival, which helped slow the rate of job loss, “said Chris Williamson, chief business economist at IHS Markit, which provides the data, in a statement.
Companies in France led the recovery in the 19-member region, and both manufacturing and services reported the best growth in production in two and a half years. France’s flash composite production index (which measures both sectors) reached 57.6 in July, representing a 30-month high.
However, there are still concerns about the shape of the recovery in the region. Many eurozone countries have reopened their economies, but social distancing measures exist and many companies are operating at reduced capacity to avoid a spike in cases.
As a result, there is concern that unemployment levels will skyrocket in the coming months as companies struggle to operate at pre-Covid levels. Governments are also likely to end their financial support for companies to keep all their employees on the payroll.
“The concern is that the recovery may falter after this initial revival. Companies continue to cut staff counts to a worrying level, and many fear that underlying demand is insufficient to sustain the recent improvement in production. Demand should continue. recovering in the coming months, but the fear is that rising unemployment and damaged balance sheets, in addition to the need for continued social distancing, may hinder recovery, “said Williamson of IHS Markit.
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