Downturn in eurozone manufacturing sector eases in June
By Michele Maatouk
Date: Wednesday 01 Jul 2020
(Sharecast News) - The downturn in the eurozone manufacturing sector continued to ease in June, according to a survey released on Wednesday.
The IHS Markit manufacturing purchasing managers' index for the bloc rose to a four-month high of 47.4 from 39.4 in May, coming in above the flash reading of 46.9. Nevertheless, it remained below the 50.0 level that separates contraction from expansion for the 17th month in a row.
The survey found that both intermediate and investment goods continued to contract, but consumer goods producers returned to growth.
All countries recorded a relative improvement in their PMI readings, but France and Ireland stood out, with their PMIs breaching the 50.0 mark. The PMI for France rose to 52.3 from 40.6 in May, hitting its best level in 21 months, while Ireland's PMI increased to 51.0 from 39.2.
Chris Williamson, chief business economist at IHS Markit, said: "The final PMI numbers for June add further to signs that the eurozone factories are seeing a strong initial recovery as the economy lifts from Covid-19 lockdowns. The rise in the June survey is indicative of output falling at an annual rate of just 2%. That compares with a near 30% rate of contraction seen at the height of the lockdowns in April. This remarkable turnaround implies very strong month-on-month gains in the official production numbers for the past two months."
He noted that expectations for the year ahead have also rebounded sharply as hopes grow that the economy will continue to find its feet in the coming months.
"However, even with these gains, production and sentiment remain below pre-pandemic peaks, and persistent weak demand combined with ongoing social distancing measures are likely to act as a drag on the recovery. The focus therefore now turns to whether gains seen in the past two months can be built on, or if momentum fades again after this initial rebound."
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "The key message from these data, for the EZ as a whole, is that activity is now rebounding, but the overall outlook and business environment remain difficult.
"Looking ahead, we think conditions will improve further in the next few months, but we are concerned about what now appears to be a severe inventory overhang. This will have to be worked off, which will weigh on production and input purchases, as well as, from the point of view of GDP headline, gross capex. Remember, though, that we can't map the PMIs directly to the official output data, and certainly not the volatile m/m headlines."
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