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Euro area services PMI jumps past forecasts, but economists remain wary

By Alexander Bueso

Date: Friday 03 Jul 2020

Euro area services PMI jumps past forecasts, but economists remain wary

(Sharecast News) - Services sector activity in the Eurozone rebounded a bit more quickly than expected in June, the results of a closely-followed survey revealed, prompting hopes that economic growth might resume in the third quarter.
However, some economists remained wary over the longer-term prospects for growth given reports from companies that underlying demand remained weak which was keeping them from investing and hiring.

IHS Markit's euro area services sector Purchasing Managers' index was revised higher from a preliminary print of 47.5 to 48.5, against a May reading of 31.9.

The 16.6 point increase from the month before was the second largest in the survey's 22-year history and was only beaten by the 18 point surge witnessed in May.

An upwards revision to the German PMI from 45.8 to 47.0 was the chief factor behind the improved reading, while the French PMI was marked up from 51.3 to 51.7.

Chris Williamson, chief business economist at IHS Markit said: "Despite the vigour of the return to work following COVID-19 business closures, we remain cautious as to the strength of any longer-term recovery after the immediate rebound.

"[...] 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, and in particular the likely sustained weakness of demand for many goods and services due to the need to retain many social distancing measures."

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