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Jun 23, 2020

News | Europe | Economic Recovery: Euro zone downturn slows significantly in June, spurring hopes of an economic recovery

Holly Ellyatt




Amsterdam's canals empty and deserted during the government imposed quarantine due to the coronavirus pandemic.
Amsterdam’s canals empty and deserted during the government imposed quarantine due to the coronavirus pandemic.
SOPA Images.

The downturn in the euro zone continued to recover in June, according to data Tuesday, giving the latest indication of the region’s economic health as it emerges from the coronavirus pandemic.
Flash purchasing manager’s index (PMI) data — measuring activity in both the services and manufacturing sector in the euro zone — came in at 47.5 in June, up from a final reading of 31.9 in May. The 50-point mark separates contraction from expansion. Economists polled by Reuters had expected the flash June PMI to come in at 42.4.
The 15.6-point rise was by far the largest in the survey history with the exception of May’s record increase, IHS Markit said in its data release.
“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.
IHS Markit added that the ongoing downturn in output was linked to a fourth consecutive monthly deterioration of inflows of new business, “which in turn contributed to a further steep decline in backlogs of orders for companies to work through.” These factors continued to moderate in June, however, signaling that further improvement could be seen in next month’s indices.
IHS Markit’s Chief Business Economist Chris Williamson said the data “indicated another substantial easing of the region’s downturn in June.”
“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.”
The data gives markets another indication of the extent to which euro zone countries are recovering from lockdowns across the region that effectively saw whole industries shut down. 
Business activity in the single currency area had hit a three-month high in May, with the final composite PMI (which includes both manufacturing and services) coming in at 31.9, up from 13.6 in April.
The data Tuesday builds on other indications of the region’s economic wellbeing, or not. On Monday, flash consumer confidence data for the euro zone and wider European Union showed further improvement in June. Nonetheless, recent unemployment data painted a worrying picture, especially for young people.

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